Group of professionals discuss finance

Breaking news and expert analysis on legal and compliance issues

[Back To Home][Back To Archives]

From Banking and Finance Law Daily, August 13, 2013

Senate committee begins inquiry of virtual currencies

By John M. Pachkowski, J.D.

Senators Tom Carper (D-Del) and Tom Coburn (R-Okla), respectively, the Chairman and Ranking Member of the Senate Homeland Security and Governmental Affairs Committee, have sent a letter to Secretary of Homeland Security Janet Napolitano seeking information on how the Department of Homeland Security is addressing the emergence of virtual currencies.

According to a news report, identical letters were sent to the Justice and Treasury Departments, Federal Reserve Board, Securities and Exchange Commission, and Commodity Futures Trading Commission.

In their letter, Carper and Coburn noted that although issues surrounding virtual currencies continue to emerge, the technology has received mainstream attention and investment. For example, the SEC charged a Texas man with defrauding investors in a Ponzi scheme involving Bitcoin, a virtual currency traded on online exchanges for conventional currencies or used to purchase goods or services online. They also cited the filing of a registration statement by the Winklevoss Bitcoin Trust to create an exchange-traded virtual currency trust; and an interpretive guidance issued by the Financial Crimes Enforcement Network clarifying the applicability of Bank Secrecy Act regulations to “users,” “exchangers,” and “administrators” engaged in virtual currency transactions.

To further their inquiry the senators seek information on: any policies, guidance, or advisories that the that the agencies have taken related to virtual currencies; coordinated efforts with other federal agencies or state and local governments; and plans or strategies regarding virtual currencies.

The senators noted that the “expansive nature of this emerging technology demands a holistic and whole-government approach in order to understand and provide a sensible regulatory framework.” They added any potential threat and risks must be “dealt with swiftly,” but that this “potentially valuable technology” should not be “stifled” by “rash or uninformed actions.”

It should be noted that on Aug. 12, 2013, the New York State Department of Financial Services (DFS) announced that it had launched an inquiry into the appropriate regulatory guidelines that should be put in place for virtual currencies. DFS is undertaking its inquiry based on a concern that virtual currency exchangers may be engaging in money transmission as defined in New York law, which is an activity that is licensed and regulated by DFS.

Companies: Winklevoss Bitcoin Trust

LegislativeActivity: BankSecrecyAct BankingOperations NewYorkNews StateBankingLaws

Banking and Finance Law Daily

Introducing Wolters Kluwer Banking and Finance Law Daily — a daily reporting service created by attorneys, for attorneys — providing same-day coverage of breaking news, court decisions, legislation, and regulatory activity.


A complete daily report of the news that affects your world

  • View full summaries of federal and state court decisions.
  • Access full text of legislative and regulatory developments.
  • Customize your daily email by topic and/or jurisdiction.
  • Search archives for stories of interest.

Not just news — the right news

  • Get expert analysis written by subject matter specialists—created by attorneys for attorneys.
  • Track law firms and organizations in the headlines with our new “Who’s in the News” feature.
  • Promote your firm with our new reprint policy.

24/7 access for a 24/7 world

  • Forward information with special copyright permissions, encouraging collaboration between counsel and colleagues.
  • Save time with mobile apps for your BlackBerry, iPhone, iPad, Android, or Kindle.
  • Access all links from any mobile device without being prompted for user name and password.