Treasury Department Places "Real Value" on Digital Currencies, Sees No Widespread Criminal Bitcoin Use; Virtual Currency Rules Coming Later This Year

In statements that all but endorse bitcoin and digital currencies, Treasury’s Cohen Sees No Widespread Criminal Bitcoin Use.

The U.S. government sees no evidence of “widespread” use of virtual currencies such as Bitcoin to evade sanctions or finance terrorism, the Treasury Department’s top official targeting money laundering said.

“Terrorists generally need ‘real’ currency, not virtual currency, to pay their expenses -– such as salaries, bribes, weapons, travel, and safe houses,’ David S. Cohen, the undersecretary for terrorism and financial intelligence.

‘‘The same is true for those seeking to evade sanctions,’’ Cohen said in a speech at the New York headquarters of Bloomberg News.

Cohen rejected arguments that regulation would drive virtual currency innovation out of the U.S., saying ‘‘the opposite is true’’ in this new industry.

‘‘Financial transparency can help bring stability to the virtual currency market and security to its users and investors,’’ Cohen said. ‘‘And that is what we are trying to do through sensible, flexible and -– to use a word from the tech world -– scalable regulation.’’

At the same time, Cohen emphasized that the government would err on the side of squeezing innovation if necessary for law enforcement purposes.

Cohen said that the Treasury Department places “real value” on financial innovation such as digital currencies.

“Advancements in technology that allow entrepreneurs and businesses to innovate, grow and hire are crucial to our country’s long-term success,” Cohen said.

Cohen has served as undersecretary since 2011. He first joined the Treasury in 1999 and, while working for its general counsel, helped draft part of the Patriot Act that granted the regulator new tools to thwart money laundering and terrorist financing after the Sept. 11 attacks.

New York financial regulators also have been working on a response to Bitcoin. Benjamin Lawsky, the state’s superintendent of financial services, announced last week that his office is accepting applications to operate exchanges for Bitcoin and other digital currencies. He plans to propose a set of rules for virtual-currency firms by mid-year.

As I stated before, bitcoin is here to stay. Wall Street wants High Frequency Bitcoin Trading and the Treasury has taken a hands-off approach.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com