Senate Grills Bitcoins - Live Webcast

Tyler Durden's picture

"Beyond Silk Road: Potential Risks, Threats, and Promises of Virtual Currencies" is the title of today's Senate hearing (from Homeland Security) on th eperils of Bitcoin. We are sure the exaggeration and exasperation will run high as Government offers up its Financial Crimes (and missing and exploited children) directors, and the de-centralized unregulated crypto-currency faces them down...


Live Stream (via Senate)



Panel I

    Jennifer Shasky Calvery
    Director, Financial Crimes Enforcement Network
    U.S. Department of the Treasury

    Mythili Raman
    Acting Assistant Attorney General, Criminal Division
    U.S. Department of Justice

    Edward W. Lowery III
    Special Agent in Charge, Criminal Investigative Division
    U.S. Secret Service, U.S. Department of Homeland Security

Panel II

    Ernie Allen
    President and Chief Executive Officer
    The International Centre for Missing & Exploited Children

    Patrick Murck
    General Counsel
    The Bitcoin Foundation, Inc.

    Jeremy Allaire
    Chief Executive Officer
    Circle Internet Financial, Inc.

    Jerry Brito
    Senior Research Fellow, The Mercatus Center
    George Mason University


The best "brief" summary of what is Bitcoin...


Here is's color on what to expect...

Given the title, it’s perhaps unsurprising that Silk Road features heavily in some testimony. In particular, Mythili Raman, acting assistant attorney general for the US Department of Justice’s Criminal Division, uses it in his prepared statement as an example of why regulation of decentralized currencies should be “sufficiently robust”.

Anonymity vs privacy

Silk Road, the online black marketplace taken down by FBI investigators in October, highlights “challenges investigators face when they encounter these systems, some of which may ultimately require additional legal or regulatory tools,” Raman said, singling out the difficulty of accessing customer records as one of the most significant challenges facing law enforcers dealing with virtual currencies.

Ernie Allen, president and CEO of the International Centre for Missing and Exploited Children, is also worried about anonymity in virtual currencies. In his testimony, he will voice his concerns over the use of virtual currencies including bitcoin for child pornography and sex trafficking payments.

“In our consultations with law enforcement worldwide, we have heard the argument that there is a difference between privacy and anonymity. Law enforcement leaders embrace the broadest possible privacy protections for individuals, but emphasize that absolute internet anonymity is a prescription for catastrophe,” he says. “Our challenge is to find the right balance.”

Other testimony challenged those concerns about anonymity, though. “Anonymity is also a two-way street,” says Patrick Murck, general counsel for the Bitcoin Foundation, in his prepared statement.

“A top dealer on Silk Road was actively working with federal law enforcement, the anonymity of Silk Road making it easier for them to make undercover drug deals and subsequent arrests,” he explains.

Murck also has some feedback for those that hold up Silk Road as an example of bitcoin’s dangers, cautioning against tying bitcoin and Silk Road too closely together. He cites the Genesis Block’s analysis of the contribution that Silk Road made to bitcoin pricing.

In late December 2010 and early 2011, people buying bitcoins to make Silk Road purchases may have spiked the price from $.30 up to $.80. The price was then boosted by mainstream media attention, before settling at around $5, he says. Further price spikes were unrelated to Silk Road, and even its takedown in October had little long-lasting effect.

“The less this colors public and policymaker assessments of Bitcoin, the better,” he argues in his testimony. “Criminals do turn the beneficial instruments of society to their ends. But overreacting to this simple and obvious fact because Bitcoin is exotic and new could delay Americans enjoyment of Bitcoin’s benefits, which are vastly greater than its potential costs.”

Decentralized vs centralized currencies

Jerry Brito, a senior research fellow at the Mercatus Center at George Mason University and director of its Technology Policy Program, testifies that a decentralized currency like bitcoin would in any case be less appealing to online crooks than a centralized digital currency, like Liberty Reserve, which was taken down after its founders were arrested.

While of growing concern, to date, virtual currencies have yet to overtake more traditional methods to move funds internationally.

“Serious criminals looking to hide their tracks are more likely to choose a centralized virtual currency run by an intermediary willing to lie to regulators for a fee, rather than a decentralized currency like bitcoin that, as a technical matter, must make a record of every transaction, even if pseudonymously,” Brito points out.

Brito compares centralized digital currency Liberty Reserve’s estimated $6bn in crime-related revenues to under $200m in drug sales via Silk Road. He adjusts the Silk Road revenues down from the oft-quoted $1bn figure to reflect bitcoin value over the entire period.

At least one regulator seems sympathetic. FinCEN director Jennifer Shasky Calvery points out in her testimony that virtual currencies have yet to overtake more traditional methods to move funds internationally, whether for legitimate or criminal purposes.

“Any financial institution could be exploited for money laundering purposes,” she points out, adding, “While of growing concern, to date, virtual currencies have yet to overtake more traditional methods to move funds internationally, whether for legitimate or criminal purposes.”

Inter-departmental collaboration

FinCEN itself is hard at work, and several FinCEN virtual currency experts gave a comprehensive presentation on the topic to an audience of Federal and state bank examiners at an FFIEC Payment Systems Risk Conference, Calvery says, adding that the agency also works with the FBI, with the Treasury Cyber Working Group, and “a community of other financial intelligence units”.

This inter-departmental collaboration is an important strut of the government’s approach to law enforcement in virtual currency, says Raman, especially in the context of the Government’s Strategy to Combat Transnational Organized Crime. The Department of Justice works closely with FinCEN and the State Department, and it was this relationship that enabled the co-ordinated targeting of Liberty Reserve, he says, adding:

“Such coordinated actions are integral tools in combating illicit finance. Investigations into illicit virtual currency businesses therefore often require considerable cooperation from international partners.”

He highlighted the fact that the Liberty Reserve takedown involved co-operation between 17 countries.

The Foundation is eager to talk up its relationship with regulators, even if Murck finds “details on which we might quibble,” such as the Foundation’s desire for a notice-and-comment process before FinCEN issued its new virtual currency guidance in March. However, the Foundation has found federal regulators welcoming on the whole, he says.

Harsh words for state regulators

He reserved harsh words for regulators at the state level, however, particularly calling out “one state regulator”, which he said issued 22 subpoenas to bitcoin-related businesses, and made TV statements about “narcoterrorism”. He’s referring to New York’s Department of Financial Services, who made that statement on the air.

“Irresponsible public statements like these make it more likely that legitimate bitcoin businesses will relocate to more welcoming countries,” Murck said.

However, he added that he saw positive signs among both state regulators and banking executives, indicating that greater understanding is coming.

Calvery echoed Murck’s conciliatory overtones, talking about an outreach effort to court the bitcoin community. FinCEN met with the Bitcoin Foundation in late August, and has invited it to present to a Congressionally-chartered forum, the Bank Secrecy Act Advisory Group (BSAAG) scheduled for mid-December.

Jeremy Allaire, founder of merchant payment services firm Circle Internet Financial, which recently received $9m in funding, also wants a collaborative approach to regulation. He identifies several dangers for an unregulated bitcoin community in his testimony, including tax dodging, fraud, and terrorism. Illiquidity and volatility are two other dangers, he warned, predicting wild price fluctuation if central banks and institutional investors are not able to act as market-makers in bitcoin.

“I believe we are at the forefront of another twenty year journey of Internet-led transformation, this time in our global financial systems, and the opportunity is to foster that economic change while simultaneously putting in place the safeguards that only government can enable,” he says.


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DoChenRollingBearing's picture update, 2:45 PM - 3:00 PM (US ET)

figures approximate:

Total BTC bougt at exchanges: 1020 BTC

US total: 613 (first time I have seen USA > China)

China total: 386

LARGEST BTC transaction: 52 

Prices vary, even in USD, approx. average price: $600 / BTC

fonestar's picture

Dedicated to all you boot-licking fake libertarians who are having no fun watching the rise of the mighty Bitcoin!!

EscapeKey's picture

So that's 4 of 6 obviously completely biased against bitcoin.

I expected more, tbh.

pipes's picture

about the same ratio of ZH posters...just goes to show

outamyeffinway's picture

Looks like it will just be "absorbed" into the existing fiat/paypal digital transfer money world. In essence, one day you will sit there and say, "why bother"...imo

fonestar's picture

...yeah good luck with that ROFL!!

nope-1004's picture

fone.... you had your tail between your legs last time it crashed.  Now you're just down right annoying with your polyanna comments only because it is bubbling up.  You chime in on no other thread other than Bitcoin, but when it crashes, you're gone.  Obsessive compulsive much?

If you think the US govvy is going to let an alternative currency prevail, without war and trade embargos, you're a bit of an idiot.


fonestar's picture

Uh, when did I ever hide out?  I've been buying roughly the same amount for over two years now.  I had to sell a few BTC around $130 to pay some debts but other than that I've been in this like a dirty shirt the whole time.

nope-1004's picture

So you sold at 130 and bought (as I read yesterday from you) at 500?  Hmmm....

I knew a few investors like you.  They came to their senses only after they were completely wiped out, because they couldn't differentiate between everyday market gambling and chasing something clearly in a log (parabolic) uptrend.

Bitcoin may last.  But I predict you won't.


fonestar's picture

Why would I dump all by BTC?  I would never do that.  Read the damn post!  I sold some BTC at $130 and I was back in at $200.  It wasn't because I wanted to.  I was forced to sell some 40% junk silver over a year ago too, big deal.

MillionDollarBogus_'s picture

According to a study of 775 fiat currencies by, there is no historical precedence for a fiat currency that has succeeded in holding its value. Twenty percent failed through hyperinflation, 21% were destroyed by war, 12% destroyed by independence, 24% were monetarily reformed, and 23% are still in circulation approaching one of the other outcomes.

 The average life expectancy for a fiat currency is 27 years, with the shortest life span being one month. Founded in 1694, the British pound Sterling is the oldest fiat currency in existence. At a ripe old age of 317 years it must be considered a highly successful fiat currency. However, success is relative. The British pound was defined as 12 ounces of silver, so it's worth less than 1/200 or 0.5% of its original value.

In other words, the most successful long standing currency in existence has lost 99.5% of its value. Given the undeniable track record of currencies, it is clear that on a long enough timeline the survival rate of all fiat currencies drops to zero.

Chris Mack

akak's picture

I think it should be noted that the British ounce (pound) has only been a fiat currency since World War I --- before that, it was backed by either gold or silver.

Tall Tom's picture

Sorry to confuse you with the facts...but...


"The gold standard was suspended at the outbreak of the war in 1914, with Bank of England and Treasury notes becoming legal tender. Prior to World War I, the United Kingdom had one of the world's strongest economies, holding 40% of the world's overseas investments. However, by the end of the war the country owed £850 million (£35.1 billion as of 2013),[26] mostly to the United States, with interest costing the country some 40% of all government spending. In an attempt to resume stability, a variation on the gold standard was reintroduced in 1925, under which the currency was fixed to gold at its pre-war peg, although people were only able to exchange their currency for gold bullion, rather than for coins.




You ought to read the History.

akak's picture

Tall Tom, I am and was well aware of Britain's brief (quasi-)return to the gold standard in 1925, but for the sake of brevity and clarity, I decided to ignore that brief interlude.  You are technically correct, of course, but the broader point still stands: the British pound has NOT been a purely fiat currency for over 300 years.

chemystical's picture


Yes, and moreover a search of the Net will show you that he/she/it does the same shilling on at least 4 other websites.


  • Supposedly it's a cryptocurrency, but 1) it's crypto as far as you believe, and 2) the same thing can be said about gold, my navel lint, and fiats (unless you're transacting high amounts of fiat that trigger reporting).
  • Unlike my navel lint (so far at least) it can be used to conduct transactions at a distance.  Kinda like VISA?
  • So the real pro there is a combination of distance and presumed crypto
  • It pokes a finger in the eyes of Central Banks.  Thumbs up, but also the very thing that will prevent it from ever being a worthwhile threat


  • transactions can be taxed.  consumption can be taxed.  property can be taxed.  each of those is detectable to varying degrees, but the impetus for the tax collectors to escalate their detection methods is commensurate with the perception that we are evading them.  For 90% of taxpayers in my state the individual income tax process asks you whether you bought anything over the internet without paying sales tax on it.  Compliance there is about 0.001%, hence the current push (and inevitable success) in Congress to monitor and tax those transactions.
  • BTC could be outlawed.  Naysayers herein have commented that this has been tried unsuccesfully with illegal drugs.  Define success.  Eradicated?  No.  Curtailed?  Yes, because the last time I checked we had prisons full of people there for that very offense, and we also have far more paying fines (in fiat)
  • The barrier to entry for competing identical cryptocurrencies is about nil.  BTC relies solely on hype and early adoption.  Beta may have fallen to VHS and for similar reasons, and Netscape Navigator may have fallen to Explorer, but if you could trade Beta for an auto or for McD's then it would have been around as long as VHS.  Gates used a near monopoly to force the use of Explorer;  what near monopoly do BTC's backers have?
  • The TPB won't take this sitting down.  If it becomes too big of a threat they will regulate it.  Don't hand me bit torrent as the escape device.  That too can be criminalized.  Uncle Sam has been itching to regulate the Net.  BTC might help to usher in the very thing that its supporters are putatively against.

Just my BTC 0.02

fonestar's picture

I have been a general nuisance and mocking people who doubted Bitcoin's potential on:



.......and more.



akak's picture

You might want to consider getting a real life instead.

chemystical's picture

Hey, don't get me wrong.  I applaud the effort, but full disclosure helps.

Let me know the next thing your paymasters are touting.  I'm in.  No, wait, let me know the timing too.  No, wait, if you're a shill, then you'd have hooked me into buying at what might be the top of the pyramid with no "bigger idiot" in sight.  Damn it anyway.

Note that I didn't bother searching the Net for your shillings.  We might be sympatico because I found your posts at other sites I visit.  otoh, because your postings at them are monotone in content, I'll go with the shill hypothesis. 

fonestar's picture

Sorry to disappoint you but there's no conspiracy here.  Bitcoin does not have any salesmen or shills.  The smart people out there are going to play this for the deflationary black hole that it is.  If the dummies want to watch from the sidelines scratching their heads that is fine by me.

Like I said before, I just like being right.

fonestar's picture

All I am getting from this webcast so far is a bunch of suits in a wax museum (who probably couldn't set up a home wifi router) talk about regulating the most sophisticated currency on Earth.

Hey, let me know once they can properly describe Bitcoin okay?  It should be $100,000 by that time LOLOLOLOLOL.

Keep the Lulz coming!!!!!

EscapeKey's picture

oh, they are "very, very concerned" blah blah blah

it's just a load of statists giving reasons why bitcoin is a terrible, terrible idea.

seriously, it's a fucking waste of time listening to this. it's completely scripted, and as is the outcome.

fonestar's picture

This Bitcoin Foundation guy is pissing me off.  Looks like one of those dial-a-nerd guys.

I want Cody Wilson!

Ignatius's picture

Yeah.  Bitcoin better watch out or it's gonna get the HSBC treatment.

fonestar's picture

This is great actually, because the logical conclusion of this debate is that we have total freedom or total control.

The "price" of Bitcoin means nothing to me.  I want total freedom.  Free as in beer, but also freedom to do what I want.  I do not want 86% freedom.  I do not want 96.4% freedom.  I will settle for nothing less than pure 100% distilled freedom.

The Gooch's picture

You'd be better off (when the cord is cut) with a still, then.


CH1's picture

The "price" of Bitcoin means nothing to me.  I want total freedom.

Well said, Fonestar. Thank you.

Harlequin001's picture

Yeah right, the freedom for me to walk on your lawn, to take your car when I choose and to help myself to your goods when it suits me.

100% freedom. Fucking deluded.

fonestar's picture

Freedom, responsibility, morals, laws and non-aggression principle are all seperate issues.

CH1's picture

the freedom for me to walk on your lawn, to take your car when I choose and to help myself to your goods when it suits me.

Ah, so you're going into government work?

chemystical's picture

"The "price" of Bitcoin means nothing to me."

COMPLETE BULLSHIT.  Your posts are a mixture of both, but you RARELY lose sight of commenting about price (pat present and future)

Tell me that you're a freedom fighter and are fighting purely to preserve your principles of freedom, and that's a-ok with me, but when you spend the MAJORITY of your "ink" telling us about price and your investments, well then you can go fuck your hypocritical and lying self.

fonestar's picture

Thanks, but it is you that can go fuck yourself.

In the interim period "price" can tell us who is winning.

chemystical's picture

Wait, so you are concerned with price?  You previously posted that it didn't concern you.

Do you moonlight as Obama's speechwriter or Jay Carney's? 

From each of the tourstops: "You can keep your BTC if you want to"

After the crash:  "I never said that you can keep your BTC"

fonestar's picture

I care more about principles than price.  If you say you support freedom and then go and accept fiat knowing there are alternatives then you are a hypocrite.  Price does show which way the money is flowing and who is winning the war and that relates to principles and values.  So yes, I care about price but primarily as an indicator.

Blano's picture

If price is the only factor, why aren't you in stocks then?

New World Chaos's picture

I'm not going to listen either, because it will melt my brain, but maybe they won't try to stomp it like Stalin.  Not yet.  Some people, including the DoJ and the Fed, supposedly aren't pushing to regulate?  WTF?  Bad news if true; it would mean we are being played.  The best news would probably also be the most likely outcome:  Yet another scripted, knee-jerk, dysfunctional and ultimately futile "war", all to protect the children. 

The surprisingly positive article is here:

Disclaimer:  It's fucking BusinessWeek.

akak's picture

"most sophisticated" = least tangible + least proven + least transparent + most fragile

fonestar's picture

And you would know that how?  Background?  Experience?  Reference?

akak's picture

Your cultlike shilling for bitcoin here is really getting annoying.

What I said was not necessarily an indictment of Bitcoin, merely fact.

The average man on the street can instinctively understand the holding of gold and silver, and their (former, for now) role as money, whereas I highly doubt the average person (outside of the technogeek brigade, and maybe not even then) will EVER fundamentally understand Bitcoin, which apparently takes at least a PhD in computer science for one to fully grasp.  That alone makes me skeptical of its widespread adoption.

fonestar's picture

If the "man on the street" does not understand virtualization technologies or Bitcoin that is fine by me.  If we had to rely on that guy we wouldn't have made it this far anyway.  Technology melds in my mind with mertiocracy and puritanical views on "kill or be killed" capitalism.

yrat's picture

exactly.  the average sheep on the street has no clue how his/her magic credit card works either, but that doesn't stop them from being used.  how exactly is this an argument against bitcoin?

sleigher's picture

The that end most people on the street don't understand fractional reserve banking or the fed or any of it.  But I guess that is forced on them so it doesn't matter...

EscapeKey's picture

I like how you accuse him of "cultlike shilling", and then go on to do the same with gold and silver.

No, it doesn't "take a PhD to understand" bitcoin, just as it doesn't require a greatly detailed understanding of the internal combustible engine in order to drive a car.

fonestar's picture

Because remember.... you need to buy silver OR Bitcoin.

EscapeKey's picture

Yep, one couldn't possibly sit on <gasp> multiple asset classes at the same time.

fonestar's picture

Disclosure:  I also own thousands of dollars worth of nickels and copper cents too.  I bet that's a real mind f*c& eh?