Federal authorities signaled their willingness to accept Bitcoin as a legitimate payment alternative.
In the Senate hearing on Monday, interested parties received the clearest indication of the government’s desire to grapple with the consequences of Bitcoin’s growth.
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Bitcoin rallies to $900
Bitcoin keeps climbing higher, touching $900 Tuesday as regulators in the U.S. consider what they could be used for and the possibility that they are a legitimate currency. Bitcoin experiences a lot of volatility now as Japanese Bitcoin exchange Mt.Gox reported a range of between $901 and $503 on Tuesday alone.
Nathaniel Popper of Dealbook believes the rally in price of the crypto-currency is aided by signs that the government would not stand in the way of Bitcoin’s development, even as the government has been cracking down on criminal networks that use the digital money.
Bitcoin could be a significant part of financial landscape
Nathaniel Popper points out Monday’s Senate hearing was a clear indication that Bitcoin and other similar networks could become more lasting and significant parts of the financial landscape.
Jennifer Shasky Calvery, the director of the Treasury Department’s Financial Crimes Enforcement Network, remarked the decision to bring virtual currency within the scope of regulatory framework should be viewed by those who respect and obey the basic rule of law as a positive development for this sector. She also said such a move also recognizes the innovation virtual currencies provide, and the benefits they might offer.
Bitcoins are commodities or securities?
However, Jennifer and a few other officials at Monday’s hearing did say that basic questions still had to be answered as to whether the Bitcoins are more properly categorized as commodities or securities since such a distinction would determine which agencies regulate the networks and how they are treated under tax law.
Bitcoin has been gaining considerable popularity recently, with China exchanges particularly active. U.S. investors can take exposure in this highly volatile currency by opening an account with Coinbase, which is a startup company which is easing the process for U.S. investors to purchase Bitcoins. It is quickly becoming the well-known U.S. exchange for the digital currency. After verifying the investor’s identity and bank account, he or she will be able to purchase up to ten Bitcoins per day through the site.
During Monday’s hearing, law enforcement officials said it can be harder to track criminals who use Bitcoin as they operate across international borders and often don’t use established financial institutions that report transactions.
However, an assistant attorney general at the Justice Department, Mythili Raman said as every Bitcoin transaction was recorded on a public ledger, it was possible for investigators to trace the movement of money between accounts and hence it is not immune from investigation.
Drawing parallel to credits cards and online payment systems like PayPal, the officials at the hearings pointed out that crime should not be a reason to limit innovation.