Federal agencies testify on virtual currencies amid Bitcoin advocacy push

Those arguments seem to have made an impression, because government officials repeated many of them at this week's hearings. The Homeland Security Committee invited representatives of three federal agencies to testify before the committee this week. Jennifer Shasky Calvery represented the Financial Crimes Enforcement Network, which enforces the nation's laws against money laundering. Mythili Raman spoke on behalf of the Justice Department, whose enforcement activities have included the shuttering the Bitcoin-based drug marketplace Silk Road. And Edward Lowery spoke for the Secret Service, which (along with the Justice Department) was involved in shutting down e-Gold and Liberty Reserve, two virtual currencies that the government alleged had become vast money- laundering operations. Calvery also testified before the Senate Banking committee on Tuesday. "Virtual currencies have yet to overtake more traditional methods to move funds internationally" for "criminal purposes," Calvery said. She pointed out that the Bitcoin network has processed only about $8 billion worth of transactions over the last year, compared to an estimated $1.6 trillion in "global criminal proceeds" in 2009. Clearly, the vast majority of those transactions are using some other financial network. "We are attuned to the criminal use" of Bitcoin, Raman said. But "there are many legitimate uses. These virtual currencies are not in and of themselves illegal." Calvery agreed. "Innovation is a very important part of our economy," she said, cautioning that premature regulation could stifle Bitcoin innovation. The personal touch Regulators are busy people. They're more likely to pay attention to flesh-and-blood advocates than to anonymous Internet commenters. Murck and Andresen's trip to Washington proved to be crucial to building productive relationships with policymakers. Calvery was a keynote speaker at the June conference. Murck and Calvery met in the speakers' room at the conference and had a conversation that would later lead to the closed-door August meeting between regulators and Bitcoin advocates. The day after the June conference, Murck was introduced to staffers on the Senate Homeland Security Committee, beginning a conversation that culminated in this week's hearings. Murck says that not everyone in the Bitcoin community was happy about his engagement with Washington. The Bitcoin community has a strong libertarian streak, and many Bitcoin devotees wotried that conversations with federal regulators could help to legitimize and encourage regulation. But to the surprise of many, the Bitcoin advocates’ charm offensive actually changed the minds of many D.C. insiders. Winning over Allen was a particular coup for the Bitcoin community. Allen's warnings against the dangers of premature regulation were particularly effective coming from a long- time activist against child pornography. HOUSE_OVERSIGHT_029966