A lobby group representing the digital Bitcoin (BTC) currency has met with US authorities to discuss their worries about its potential for money laundering abuses and use in funding illegal activities such as drug purchases or terrorist funding.
Representatives of the BTC’s largest lobby group met federal law enforcement and financial agencies on Monday as the US authorities increased their scrutiny of the controversial digital currency and sought to increase the anti-money laundering (AML) controls surrounding it.
Bringing Bitcoin into the normal global financial system however goes against the founding principle of the digital currency which was supposed to be outside of the ‘corrupt’ banking system and has been a favourite among techies, hacktivists and others for that reason.
Commenting on the discussions, Patrick Murck, general counsel for the Bitcoin Foundation, said that the group was meeting with bodies that included the US Federal Reserve (Fed), the Federal Bureau of Investigation (FBI), the US Treasury Department, tax officials and members of the secret service.
In a public email, Murck described the agenda of the Washington meeting as to “help regulators, policymakers and law enforcement officials better understand the Bitcoin protocol and distributed finance so they can make better decisions and develop new methodologies for identifying and interceding illicit activity.
“Bitcoin and distributed finance is here to stay and our preferred path forward is a co-operative one, where we all can help ease each other's transition into an inclusive and distributed global financial system.”
Concerns over possible abuses of the BTC stem from the fact that unlike traditional currencies, the BTC is not backed by a central government, but instead created by a computer programme and can be traded or used to buy goods and services. The exchange rate for a BTC has proved highly volatile and the online currency circulates without using intermediaries such as banks.
Murck said he hoped the Federal meetings would clear up misunderstandings. “We view this as the beginning of a conversation about the appropriate role of government and law enforcement in this emerging space. Our hope is that this is the beginning of an open and transparent dialog between good-faith stakeholders to find common ground and develop public-private partnerships.
“It is refreshing to see US regulators at the federal level take a responsible approach to working with the industry to understand these issues.
"Contrast that with what we are seeing at the state level: regulators seem more interested in rushing to conclusions and tripping over themselves to be first movers, without regard to the unintended consequences for the industry and US policy at the national level.”
The US Senate Homeland Security and Government Affairs Committee recently wrote to the Departments of Treasury, Homeland Security and other government agencies requesting details on how they oversee the use of virtual currencies, part of an investigation begun several months ago.
The letters followed 22 subpoenas issued on 12 August by the New York Department of Financial Services to BTC businesses asking questions about their anti-money laundering (AML) and consumer protection policies. In addition, the German government has declared Bitcoin is subject to tax this year as scrutiny of the digital currency increases.