US Senate hearing sends Bitcoin value soaring

A US Senate hearing on the “risks, threats and promises” of the Bitcoin has been told virtual currencies are a “legitimate financial service” and have the potential to provide similar benefits and risks as other types of online paying systems. Soon after the hearing the value of the Bitcoin soared; it has trebled in value in the last month alone.

In a letter to the Homeland Security committee sent before the meeting, Ben Bernanke, the outgoing chairman of the Federal Reserve, was cautious but gave his blessing to the controversial virtual coin. Although the Federal Reserve generally monitors developments in virtual currencies and other payments system innovations, it does not necessarily have authority to directly supervise or regulate these innovations or the entities that provide them to the market,” he said, adding, however that the Bitcoin, “may hold long-term promise, particularly if the innovations promote a faster, more secure and more efficient payment system”.

The Senate hearing was held in the wake of the closure of Silk Road, the underground online market place, in October. The FBI shut down the site, but questions over the role the Bitcoin played in the operation remain. The Homeland Security and Governmental Affairs Committee has since been investigating the “promises and risks” of the virtual currency for “government and society at large”.

The Bitcoin was valued at $13.50 at the end of 2012, but has risen sharply in the intervening months, peaking at $785 on the Mt.Gox exchange, following the Senate hearing.