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Bitcoin has legitimate uses: SEC, DOJ

Although BitTorrent is often considered primarily a piracy app / service, there are many legitimate uses for the protocol. The same is true of the virtual currency Bitcoin, according to the DOJ and the SEC, who were set on Monday to report just that, according to Bloomberg.

A number of questions about BitCoin arose following the shutdown, some five weeks ago, of the “Silk Road Hidden Website,” where Bitcoins could be used to purchase drugs and other illicit goods. Despite the recent shutdown, a new site, Silk Road 2, has already been created.

Ahead of a Monday hearing, representatives from both the SEC and DOG told the U.S. Senate Committee on Homeland Security and Governmental Affairs that Bitcoin offers plusses and minuses, just as any other online-payment system does. The agencies released their comments in letters they released before the meeting.

Peter Kadzik, principal deputy assistant attorney general, wrote:
The FBI’s approach to virtual currencies is guided by a recognition that online payment systems, both centralized and decentralized, offer legitimate financial services.

Like any financial service, virtual currency systems of either type can be exploited by malicious actors, but centralized and decentralized online payment systems can vary significantly in the types and degrees of illicit financial risk they pose.
There are nearly 12 million Bitcoins in circulation, and like stocks and bonds, their price can vary wildly. As such, on Sunday SEC Chairman Mary Jo White wrote that the virtual currency
likely would be securities and therefore subject to our regulation.
Ben Bernanke, chairman of the Federal Reserve, which is also weighing in on the hearing, said that the Fed has no plans to regulate the currency. In a letter to the comittee, he wrote:
Although the Federal Reserve generally monitors developments in virtual currencies and other payments system innovations, it does not necessarily have authority to directly supervise or regulate these innovations or the entities that provide them to the market.
Bitcoin value has gone up over 30-fold so far this year. They reached a record high and showed a trade range of from $471.23 to $604.42 at 10:18 a.m. PT at BitStamp, one of the more active Bitcoin online exchanges.

Another Senate committee, the Senate Committee on Banking, Housing and Urban Affairs will hold a separate Bitcoin hearing on Tuesday, Nov. 19.

BTC China, the world's largest Bitcoin exchange by voume, announced on Monday that it has received $5 million in Series-A financing. That is the first round of financing that a new business venture undergoes after seed capital. BTC China received the funds from institutional investors Lightspeed China Partners and Lightspeed Venture Partners.

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