Bitcoin Goes To Washington As Senators Parse Currency's Legality

Nov 18, 2013
Originally published on November 18, 2013 6:27 pm
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MELISSA BLOCK, HOST:

This is ALL THINGS CONSIDERED from NPR News. I'm Melissa Block.

ROBERT SIEGEL, HOST:

And I'm Robert Siegel.

On Capitol Hill, a first today, a hearing on Bitcoin. That's the virtual currency that tech-types and venture capitalists are excited about and that government and law enforcement are wary of. Bitcoin is a type of digital cash that can make online transactions fast and easy, which appeals to criminal elements. It also makes transactions cheaper, which would be nice for the rest of us. Joining us is NPR technology correspondent Steve Henn. And, Steve, Bitcoin goes to Washington. Does that mean it's being taken seriously or that it's in some kind of trouble?

STEVE HENN, BYLINE: Well, I think it would be very difficult for any government, including ours, to completely kill Bitcoin off. You know, Bitcoin is run on a completely decentralized volunteer network. So it's not like you could take out a central server and shut it down. What I think ultimately was at issue in the Senate hearing is whether or not this kind of digital payment method is going to become more closely integrated into the regulated financial system or really pushed further underground.

And I think the early indications are pretty good for Bitcoin. Officials from the Justice Department and the Treasury Department testified today that virtual currencies like Bitcoin are not inherently illegal. But they still expressed some concern that currencies like these could be attractive to criminals because they can be used to launder money or perhaps create anonymous or nearly anonymous online transactions.

SIEGEL: Now, one might have expected this hearing to be before the finance committee, but it was actually before the Senate committee that deals with homeland security because of a connection between Bitcoin and what's known as the Silk Road economy. Tell us about that.

HENN: Well, the Silk Road was, until recently, a thriving online illegal marketplace. Depending on whose estimates you believe, the Silk Road site facilitated between 200 million and perhaps as much as $1 billion in illegal transactions, mostly drug deals. The thing that made the Silk Road famous was that it only accepted payments in Bitcoins. The theory on the site was that because Bitcoins aren't attached to a bank account, they wouldn't trigger typical money laundering alarms.

And there's a widely held perception that Bitcoin transactions are anonymous. But in fact, that's simply not true. The way a computer knows that a Bitcoin is a real Bitcoin is that there's a public history of every transaction that piece of currency has been used in. That history is built into the code. In fact, that digital trail is likely to feature prominently in the persecution of the folks who allegedly created the Silk Road.

SIEGEL: The prosecution of them, you mean.

HENN: Right.

SIEGEL: Now, what came out of the hearing today? And what's next for Bitcoin if it doesn't offer anonymity online?

HENN: Well, I think what came out of this hearing is that regulators really don't want to quash this thing. There was a pretty big Bitcoin rally today with the virtual currency hitting all new time all-time highs. And I don't think Bitcoin's future is really on sites like the Silk Road. The thing that has venture capitalists so excited is that Bitcoin makes it possible to process online transactions for almost nothing.

And that could be a big help in the developing world, as well as here at home. So there are some smart folks betting millions of dollars that if Bitcoin goes mainstream, it could actually undercut big companies like Visa and MasterCard and online commerce.

SIEGEL: OK. Thanks, Steve.

HENN: My pleasure.

SIEGEL: That's NPR's Steve Henn, our technology correspondent who joined us from Silicon Valley. Transcript provided by NPR, Copyright NPR.