Today’s Congressional hearing, the first of its kind about how to regulate digital currencies, comes hot off the heels of the Silk Road controversy.
The questions surrounding one of these main currencies, Bitcoin, will likely turn into a broader debate on internet anonymity.
Bitcoin is a "cryptocurrency" that:
only exists online,
facilitates the transferring of funds from peer-to-peer,
is not yet fully regulated by any government.
"Bitcoin can facilitate private and anonymous transactions, which are resistant to oversight and control," Patrick Murck, general counsel for the Bitcoin Foundation, said in a prepared testimony before the U.S. Senate Committee on Homeland Security and Governmental Affairs. "This by no means implies that using bitcoin can or should provide anyone immunity from the law."
Advocates on the regulation side say that Internet anonymity is the real issue at hand.
“We simply cannot create an environment in which child exploiters, traffickers, and other organized criminals can operate on the Internet,” Ernie Allen, president and chief executive of the International Centre for Missing and Exploited Children said in a statement.
The only issue with regulating bitcoin under the pretense of ending anonymity online is that it misses the whole point. As opposed to data-heavy online credit card transactions, bitcoin is a cash equivalent of the digital age. The currency has helped countless people in the developing world by giving them the ability to bank and easily transfer money with few fees.
In Kenya, for example, bitcoin use is so widespread that many hypothesize the digital currency could soon become an official currency.
But if this cash alternative is working well in emerging economies without regulation, why would American politicians want to do so?
The answer might be that government agencies feel differently about the cryptocurrency. In August, a Texas court ruled that bitcoins indeed are “a currency or form of money,” after a ruling on a ponzi scheme case. That ruling, in effect, gave the Securities and Exchanges Commission jurisdiction over bitcoin issues for the first time.
On the other hand, Federal Reserve chairman Ben Bernanke wrote a letter to Monday’s committee, saying that while the fed monitors digital currencies, it “does not necessarily have the authority to directly supervise or regulate these innovations or the entities that provide them to the market.”
And that might be the approach that would make the American people most comfortable. While attempts to regulate it might legitimize the currency, any strong attempt to do so would likely cross the line from regulation to censorship.
Since the currency is decentralized, and is managed through a series of online exchanges, the only fail-safe way to regulate the currency would be through managing access to these exchanges.
Considering that censorship-prone China is positioning itself as the ruler of the bitcoin market, it would take a lot of explaining to the American public, should we choose to go the censorship (or regulatory) route, while they have not.
Oh, and bitcoin just hit an all-time peak value of over $600 the same day as the scheduled hearing. So suddenly, American capitalists might be more invested in Internet anonymity than we are even aware of.
After all, it might raise red flags for some, but for others it is a way to raise serious money. And in American politics, guess which one usually wins the battle.
Daniel Rivero is a producer/reporter for Fusion who focuses on police and justice issues. He also skateboards, does a bunch of arts related things on his off time, and likes Cuban coffee.