The head of an influential Senate committee on virtual currencies today warned against “killing the baby in the cradle” by over-regulating bitcoin.
Senator Tom Carper said that there were “good things” in the virtual currency, and likened the current situation to the early days of the Internet.
Speaking to the news outlet CNBC, the Democrat senator for Delaware admitted that he knew “next to nothing” about bitcoin and virtual currencies six to 12 months ago, shortly before he chaired a hearing by the Senate Homeland Security and Governmental Affairs Committee in November.
Senator Carper likened bitcoin to the Internet when it first became a commercially significant entity. “Some said that it had some upside potential. Some people said it had some downside potential too, with drug transactions and trafficking and money laundering, all kinds of downsides. But the early message for the Internet was let’s not kill the baby in the cradle,” he said.
He identified similar upsides and downsides for bitcoin: “We know that there are some good things that can happen. It can enhance transactions between sellers and buyers, it can actually help international trade, lower the cost of transactions.” He continued:
“The theme that emerged from our hearing was ‘let’s keep an eye on the bad stuff, tamp it down, find out what kind of legislation that we need in order to tamp it down’, and that’s what we’re doing.”
The Senator praised federal agencies such as the Treasury Department, the Internal Revenue Service the Department of Justice and the Department of Homeland Security for working together to analyze virtual currencies.
“I think they’re on top of it,” he said. “I was pleasantly surprised to see that they’re communicating with each other, they’re collaborating with each other.” The IRS has yet to issue firm guidance on taxation for bitcoin.
His committee had mailed several such agencies to ask for their policies and procedures regarding virtual currencies. In November, shortly before the hearing, the committee identified a “keen interest” in the phenomenon among them.
The Bitcoin Foundation applauded Carper’s softly-softly approach on bitcoin.
“It seems that Senator Carper and the Bitcoin Foundation agree that valuable resources and energy is ill-spent trying to solve hypothetical DC problems,” said a spokesperson, pointing to a “green light” from Washington to build out bitcoin-related businesses.
Jered Kenna, CEO of Tradehill, a bitcoin exchange for high net-worth individuals, is still unable to operate as an exchange after his key banking relationship fell through in August following regulatory issues.
“I don’t see as much of a need for new regulation as deciding where bitcoin fits within the existing structure,” Kenna said. “If something is illegal with cash then it should be illegal with bitcoin. You shouldn’t expect to be able to gamble or avoid paying taxes just because you’re using bitcoin.”
Capitol Hill image via Shutterstock