Given the growing acceptance of Bitcoins, Congressional and state regulator interests have piqued.
Two Senate subcommittees— the Senate Committee on Homeland Security and Governmental Affairs and the Senate Committee on National Security, International Trade and Finance—held hearings on the risks and benefits of virtual currencies. Several representatives from federal agencies spoke at the hearings including the Department of Justice (DOJ) and the Financial Crimes Enforcement Network (FinCEN).
At one of the hearings, the DOJ acknowledged that, “virtual currency systems offer legitimate financial services and have the potential to promote more efficient global commerce.” The DOJ also, however, noted that despite its promise, virtual currencies appealed to criminals and presented “new challenges” to law enforcement. FinCEN expressed the agency’s view that current regulations adequately addressed any misuse of virtual currencies.
The hearings also displayed the level of interest by state regulators. Citing that current state law regimes focus on consumer protection rather than investor protection, the Commissioner of the Massachusetts Division of Banks, speaking on behalf of the Conference of State Bank Supervisors (CSBS), proposed a cooperative venture among states for oversight of virtual currencies. The Commissioner also noted that the CSBS was working on issues such as the “right characterization of virtual currency,” consumer protection needs, and whether states will require entities to be licensed under state licensing regimes, among other things.
Despite the call for coordination among the states, the New York Department of Financial Institutions (DFS) is already leading the discussion on the appropriate regulatory oversight of virtual currencies. As part of its ongoing inquiry into virtual currencies, the New York DFS announced that it will hold public hearings on January 28 and 29 to determine the appropriate regulatory guidelines for virtual currencies, including the possibility of certain licensing requirements specific to virtual currencies. The New York DFS first launched its inquiry in August 2013.
The recent Congressional and state regulator focus on virtual currencies shows its increasing move towards more credibility. Recently, several high profile companies such as Overstock.com and Zynga and two Las Vegas casinos have indicated they will accept Bitcoins. However, with this credibility comes the potential for increased scrutiny and ultimately more regulation on the state and federal levels.