The value of a Bitcoin reached all-time highs above $700 after headlining a Senate hearing Monday, lifting the public profile of what was once an online curiosity pursued only by web enthusiasts.
The Senate Homeland Security and Governmental Affairs Committee hearing was the summation of a three-month government inquiry into virtual currencies. After gaveling in the meeting, Delaware Democratic Sen. Carper set a mild tone. “Virtual currencies, perhaps most notably Bitcoin, have captured the imagination of some, struck fear among others, and confused the heck out of many of us, including me,” he said.
Bitcoin is denomination of online money generated by computer processing power that is then bought and sold via online marketplaces. Some online stores accept Bitcoin as a form of online payment and there are so-called “deep web” stores where black market items are sold using Bitcoin. The current value of all Bitcoin in circulation is currently over $8.5 billion, a seven-fold increase from November 2012.
Ernie Allen, the CEO of The International Centre for Missing & Exploited Children, told the committee he was, “enthusiastic about the potentials of virtual currency and the digital economy for social good.” Patrick Murck of the nonprofit Bitcoin Foundation also extolled the potential emancipatory virtues of “[Moving] people from a cash based informal economy into a globally connected digital economy.”
Another witness, Jerry Brito of George Mason University, pointed out that the government may have a hard time regulating digital currencies. “Bitcoin is not a company…it’s a community,” he said, adding that there is no centralized control of the global trade in Bitcoin.
An advisory letter issued by outgoing Federal Reserve Chairman Ben Bernanke ahead of the hearing also weighed the risks and rewards of virtual currencies. “While these types of innovations may pose risks related to law enforcement and supervisory matters, there are also areas in which they may hold long-term promise, particularly if the innovations promote a faster, more secure and more efficient payment system,” Bernanke wrote.
Bitcoin and virtual currencies faced the regulatory gaze during another hearing Tuesday before a Senate Banking subcommittee. Jaron Lukasiewicz, CEO of Coinsetter, a Bitcoin exchange startup based in New York says, “We understand the concerns that many officials have with it,” and, “We hope to see regulation that allows us to grow while remaining compliant.”
No matter what the Senate does, Bitcoin prices may still have room to rise. The recent spike in Bitcoin prices are widely attributed to Chinese interest and China now accounts for about 50% (cool graphic alert) of daily Bitcoin turnover.