“From a good governance perspective, I don’t think you want any government, particularly the U.S. government, to make quick determinations of what is evolving quickly in the marketplace,” said Frederick Reynolds, deputy director of the Financial Crimes Enforcement Network. His bureau, known as FinCEN, is the U.S. Department of the Treasury unit that collects and analyzes information about financial transactions in order to combat money laundering, terrorist financiers and other financial crimes.
“At the end of the day,” he added, “I think you want to draft regulations that will stand the test of time” in terms of innovation and change.
The panel, “Virtual Currencies: Bitcoin and the Role of New Currency in Criminal Enterprise,” explored the use of virtual currency for criminal activity and its general use in global commerce. The consensus was that while FinCEN and other U.S. law enforcement agencies must be watchful, it is too early to seek to halt alternative currency development.
Overall, panelists pegged the number of different virtual currencies in the global marketplace at about three dozen with perhaps as many as 2,600 different payment processors, many of which are in Europe and in New York and California.
Margo Tank, an attorney for BuckleySandler LLP in Washington, D.C., said bitcoin and other currencies represent new forms of payments that are “not legitimate tender nor are backed by any bank.” Still, she encouraged governments not to intervene arbitrarily in the developing market.
As a currency, bitcoins generally carry lower transaction costs than credit cards and provide anonymity, finality and speed. But while they could be used in criminal enterprises, there are legitimate reasons to use this currency in Internet commerce. Tank has co-authored an article that suggests that investors in alternative currencies “look before you invest.”
Reynolds said FinCEN’s regulatory reach extends to bitcoins and other payment systems when transactions fall “within our regulatory purview” regardless of the vehicle used. “What we actually regulate are individuals and businesses,” he said, rather than a specific form of currency.
Still, Jeffrey Neiman, a former federal prosecutor and now defense lawyer in Fort Lauderdale, Fla., pointed out alternative currencies are “created by people who did not want to deal” with the government within traditional commerce channels. For many, Neiman said, the anonymity behind Internet protocol or IP addresses is the attraction, particularly in an era of the extent of government surveillance punctuated by Edward Snowden’s disclosures.
Luke Sully, forensics services director of PricewaterhouseCoopers LLP, noted that while virtual currency has become “the method of exchange for bad actors” it has an above-board, strong libertarian constituency. He suggested stronger coordination of virtual currencies in the global regulatory market.
“There have been very uneven regulatory standards across the world,” he said.
The session was moderated by Nina Marino, an attorney in Beverly Hills, Calif., and sponsored by the ABA Criminal Justice Section.