NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Wednesday, November 20, 2013

This afternoon the Senate Committee on Homeland Security will hold ahearing on virtual currencies, followed by a Banking Committee hearing Nov. 19. Judging from the witness lists, lawmakers will hear the usual warnings about how Bitcoin and other digital monies facilitate money laundering, online underground drug bazaars, Internet gambling and worse.

Representatives of the Bitcoin community, meanwhile, will make the case that heavy-handed regulation would drive innovative businesses out of the U.S.“The U.S. jurisdiction has to do a lot to make themselves appealing,” Jon Matonis, the executive director of the Bitcoin Foundation (and a former BankThink columnist), told me last week. “They’re definitely not appealing right now.”

The industry is already feeling a “chilling effect,” he said, in the form of “the unwillingness of American banks to do any business with Bitcoin-related companies in the U.S.” The banks are “unwilling to cause themselves any more scrutiny. They’re way overstaffed on compliance attorneys as it is. How can you have innovation in banking when 30% of the staff is attorneys?”