Bitcoin attacked by politicians and bankers at Davos

By John Leonard
24 Jan 2014 View Comments
bitcoin-currency

US treasury secretary Jack Lew has said that he is worried that Bitcoin may be used to fund illicit activities.

Describing the virtual currency as "a phenomenon that we need more time to discuss", Lew said: "From the government's point of view, we have to make sure it does not become an avenue to funding illegal activities or to funding activities that have malign purposes like terrorist activities."

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"It is an anonymous form of transaction and it offers places for people to hide," Lew said in a televised interview with CNBC at The World Economic Forum in Davos, Switzerland.

Hinting that the US government would be looking to exercise more control over Bitcoin and other virtual currencies, Lew said:

"We've made it clear through enforcement actions that we will look at these forms of transactions and we will enforce all the rules we have on illegal money activity."

Last year the US government ruled that Bitcoin businesses must register as money services businesses, and that they are required to perform anti-money laundering checks on customers.

Other governments have been looking for ways to deal with the Bitcoin phenomenon too. In December 2013 China banned local banks from handling transactions in Bitcoins, possibly fearing that locals were using it to bypass controls and send money out of the country.

Lew said he had been in discussion with Jamie Dimon chairman and chief executive of investment bank JP Morgan, with whom he shared an "incredulity" about Bitcoin.

In a separate interview Dimon said that his bank has no plans to deal with, or even recognise, Bitcoin.

"The question isn't whether we accept it. The question is do we even participate [with] people who facilitate Bitcoin?" he said. "The people who are going to eventually really get upset with it will be governments.

"It doesn't have the standing of a government, and honestly, a lot of it... is being used for illicit purposes," Dimon added, explaining the challenges that governments face with regulating the cryptocurrency.

"Governments put a huge amount of pressure on banks: know who your client is, anti-money laundering, did you do real reviews of that... Obviously it's almost impossible with something like that".

However, in December Computing reported that US JP Morgan has moved in to patent its own payment technology ideas popularised by Bitcoin, filing for a patent for what it called a "virtual cash" system, in which it intends to allow customers to make payments "completely anonymously" with the added bonus of avoiding the "expense of today's wiring fees".

 

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