Bitcoin/USD: Regulation will bring stability to e-currencies, says top man at Treasury

Digital currencies like bitcoin will benefit from government oversight that lends credibility and stability to the overall market, according to the US Treasury Department’s top money-laundering official.

David S. Cohen, Treasury undersecretary for terrorism and financial intelligence, said in a Bloomberg News interview today that financial transparency will help bring stability to e-currency markets and security to users. “That is what we are trying to do through sensible, flexible and - to use a word from the tech world - scalable regulation”, said Cohen.

He stressed that the US government’s aim of regulating virtual currencies is driven by a desire to foster innovation and transparency in an industry that has significant potential. However, Cohen made clear that if the US Treasury is obliged to choose between innovation and transparency, the federal agency “will err on the side of transparency”.

The Treasury has urged the industry to devise ways to prevent criminal use of e-currencies rather than develop technology that “further obscures financial trails”, Cohen said.

The Treasury Department’s top man on money-laundering said that the United States will go after the many virtual currency exchanges and administrators which haven’t registered with the Financial Crimes Enforcement Network (FinCEN). “Those that do not comply with these rules should understand that their actions will have consequences.”

Cohen intimated that the Treasury will invite a suitable representative from the bitcoin community to sit on its Bank Secrecy Act Advisory Board to assist in making regulations “better informed and more effective”.

He also shared that the International Financial Action Task Force will later this year release a paper with updated common definitions for e-currencies and laying out the potential benefits and vulnerabilities for the markets in those products.