Michael Appleton for The New York TimesBenjamin M. Lawsky of New York sent subpoenas to 22 companies that have had some links to bitcoin.Updated, 8:55 p.m. | State and federal officials are starting broad investigations into shortcomings in the oversight of upstart virtual currencies like bitcoin.
The Senate’s committee on homeland security sent a letter this week to the major financial regulators and law enforcement agencies asking about the “threats and risks related to virtual currency.” These currencies, whose popularity has grown in recent years, are often used in online transactions that are not monitored by traditional financial institutions.
“This is something that is clearly not going away, and it demands a whole government response,” said a person involved in the Senate committee’s investigation, who spoke on the condition of anonymity because the inquiry is continuing.
The Senate letter went out the same day that New York’s top financial regulator, Benjamin M. Lawsky, sent subpoenas to 22 companies that have had some involvement with bitcoin, according to a person briefed on the investigation.
Previously, there have been isolated efforts to crack down on those who took advantage of virtual currencies. But the two investigations made public this week appear to be the most wide-ranging government efforts to exert more coordinated control over what has been a largely faceless and borderless phenomenon.
Bitcoin, the most well-known digital currency, was started by anonymous Japanese computer programmers in 2009 and was intended to serve as an alternative to national currencies. Only a limited number of bitcoins can be created. And an online community has bid up the price of individual bitcoins, which are stored digitally on a decentralized network of computers. On Tuesday, a bitcoin was being sold for about $108 online.
Lawmakers are worried that bitcoin and other alternative forms of money can be used to evade taxes, defraud investors and assist trade in illegal products like drugs and pornography.
Last month, the Securities and Exchange Commission accused a Texas man of profiting from a bitcoin Ponzi scheme on the same day it issued a broader warning about the dangers of similar frauds. Earlier this year, the operators of another virtual currency, Liberty Reserve, were accused of running a $6 billion money-laundering ring.
The Senate committee began looking into virtual currency a few months ago, formally interviewing several regulators and industry participants. The committee recently stepped up its efforts because staff members had heard “real concern” from law enforcement officials, and because it became clear that regulators did not have enough information about the technology, according to the person involved in the investigation.
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