Ban 'crime aid' bitcoin, US senator tells regulators
28 February 2014
A US Democratic senator has sought a ban on the popular digital crypto-currency bitcoin, citing it as both ''unregulated and unstable'' in a letter to federal regulators.
Joe Manchin, representing West Virginia, wrote to federal regulators on Wednesday, ''This virtual currency is currently unregulated and has allowed users to participate in illicit activity, while also being highly unstable and disruptive to our economy.'' The missive was sent to Treasury Secretary Jack Lew and Federal Reserve Chairwoman Janet Yellen, among others.
In the letter, Manchin said bitcoin attracts and enables criminals even as its value to the US economy is ''suspect, if not outright detrimental''. He noted this week's collapse of the largest bitcoin currency exchange, Mt Gox.
India has already cracked down on virtual currencies like bitcoin, as reported earlier (See: Avoid virtual currencies like Bitcoin, RBI warns Indian shoppers). In December, the Reserve Bank of India warned the public against the use of currencies such as bitcoin, saying users expose themselves to financial, operational, legal, and security-related risks, as these are highly speculative and unregulated instruments.
Soon after, India's Enforcement Department (ED) carried out raids on operators of virtual currencies, in Ahmedabad and elsewhere, finding these in clear violation of the Foreign Exchange Management Act (FEMA) (After RBI warning, ED raids Bitcoin providers).
Manchin said he was concerned that countries such as Thailand, Russia, and China were cracking down on the bitcoin, but America was still ''holding the bag'' on a valueless currency.
Manchin described bitcoin as ''a haven for individuals to buy black market items'', citing the notorious ''Silk Road'' black market site where users could purchase drugs, guns and other illegal elements with bitcoin until the FBI closed it down and confiscated more than $3 million worth of the crypto-currency in October 2013.
The senator also said bitcoin posed a danger to the US economy at large, citing its recent volatile value fluctuations and deflationary nature caused by hacks like that of the Japanese Mt Gox Bitcoin exchange site last week, where hackers took advantage of a software flaw to drain its value (Mt Gox website down amid solvency issues).
''News of plummeting or skyrocketing bitcoin prices is almost a weekly occurrence,'' Manchin said. ''In addition, its deflationary trends ensure that only speculators, such as so-called 'bitcoin miners,' will benefit from possessing the virtual currency. There is no doubt average American consumers stand to lose by transacting in bitcoin.''
Each bitcoin is identified by a public address and a private key, which allows for an anonymous and irreversible system of transactions online. Numerous countries including China, South Korea and now India have already banned bitcoin.