Currency Cops Want Congress to Steer Clear of Bitcoin, Thanks

BusinessWeek

As he kicked off a congressional hearing on virtual currencies, Senator Tom Carper (D-Del.) made an admission that should surprise no one: Bitcoin “confused the heck” out of him. His task, he said, was just to find out what Congress could do to help law enforcement as they tried to confront the novel challenges posed by the anonymous virtual currency.

A bit more surprising was the answer he got from representatives from the law enforcement agencies who testified. No one disputed that virtual currencies are great for facilitating illegal behavior, like buying child porn, drugs, and weapons, or paying to get people killed. But everyone had pretty much the same answer for him: “No, thanks.”

Mythili Raman, acting assistant attorney general for the criminal division of the U.S. Department of Justice, said the department is doing just fine, using existing money laundering statutes to prosecute EGold and Liberty Reserve, virtual currencies it busted for money laundering offenses in the last five years. Likewise, criminal statutes on the books seem to be sufficient to prosecute the man recently arrested for allegedly running Silk Road, the online black market. “As our track record shows, we are up to the challenge, and we are innovating as the criminals are innovating,” she said at the hearing. “I do think we have the statutory tools that we need, for the most part.”

The Department of Justice seems to feel entitled to beat its chest about its technical savvy. The Liberty Reserve case is the largest money laundering case it has ever brought, and the Silk Road bust left it holding $70 million worth of Bitcoins.

Ed Lowery, the special agent in charge of the criminal division of the Secret Service, said he doesn’t even think Bitcoin is the virtual currency of choice for the international criminal networks that his agency considers its primary adversary in the cybercrime world. The decentralized and uncontrollable nature of Bitcoin apparently makes the gangs of Eastern Europe as queasy as it does U.S. officials. While virtual currencies have  indeed been used by criminals, Lowery said, the most effective way to combat them is to try to help toughen the spines of countries whose lax regulations allow criminals to operate with impunity.

Following suit, Jennifer Shasky Calvery, director of the U.S. Treasury Department’s Financial Crimes Enforcement Network, said worries about Bitcoin, but she didn’t offer  a lot of advice about how helpful but baffled lawmakers such as Carper could pitch in. It turns out that not every problem has a high-tech answer.

“Cash is still probably the best medium for laundering money,” she said.

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