Senate Hearing on Future of Bitcoin: Legal Tender or Criminal Enterprise?

The U.S. Senate held a hearing on the Internet-based Bitcoin currency on Nov. 18 revealing a U.S. government that is struggling with crafting policy to govern how the virtual currency can be used in the United States.

The Senate Committee on Homeland Security & Government Affairs held a major hearing on Bitcoin and other virtual currencies called, “Beyond Silk Road: Potential Risks, Threats, and Promises of Virtual Currencies.” The Committee also has a video of the proceedings.

Bitcoin has gotten a black eye because criminals and drug dealers have used the currency in an effort to avoid law enforcement and earlier this year U.S. authorities shut down several websites that traded in Bitcoins over this use by criminals.

But recently the Chicago Federal Reserve Bank issued a “primer” on how Bitcoin works that raised the virtual currency’s stock in the world of finance.

François R. Velde, senior economist of the Federal Reserve in Chicago, wrote that bitcoin is a “remarkable conceptual and technical achievement, which may well be used by existing financial institutions.”

Velde went on saying, “The bitcoin protocol provides an elegant solution to the problem of creating a digital currency–i.e., how to regulate its issue, defeat counterfeiting and double-spending, and ensure that it can be conveyed safely–without relying on a single authority.”

Bitcoin recently reached an all time high reaching $300 on the Mt Gox currency exchange website, the highest value its ever achieved.

Unfortunately, this high comes at the same time that an illegal Internet-based drug dealing system calling itself the Silk Road 2.0 was revealed to the public by authorities.

With the release of this criminal enterprise, Senator Tom Carper, Chairman of the Senate Homeland Security and Governmental Affairs Committee, said that our world today reveals the “inescapable reality that technology is dynamic and ever-evolving and that government policy needs to adapt accordingly.”

So, what do you guys think? Are virtual currencies the money of the future, or is it a flash in the pan like so much else in the technology sector?

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