As more online merchants begin to accept Bitcoin as a form of payment, the nation's lawmakers and banking regulators are looking to understand what virtual currency means for the future of the free market. The U.S. Senate Committee on Banking, Housing and Urban Affairs hosted a hearing on the impact of payment methods like Bitcoin this week. While the future of online virtual payments remains uncertain, it seems clear that these new currencies will undoubtedly have impact making transactions at banks.
"Bitcoin will not replace the dollar or the euro or gold, but it will certainly disrupt existing financial services and their fee structures," Anthony Gallippi, co-founder and CEO of BitPay, a Bitcoin payment processing company, testified. "Today, banks charge many fees to consumers. With Bitcoin, users can handle many of their daily payments needs themselves and avoid the bank fees, so banks relying on fee revenue could be impacted the most by virtual currencies."
That may sound appealing to many banking customers, but Bitcoin comes with baggage, too.
"Unfortunately, the current lack of regulation of digital currency makes it risky for the average consumer," Mercedes Kelley Tunstall, a partner at law firm Ballard Spahr and another member of the panel at the hearing, said. "There is no protection for people whose digital currency is stolen."
That's a serious stumbling block for anyone who holds and trades bitcoins. Account holders at banks benefit from knowing that, if an identity thief drains all their funds, the institution will most likely be at fault. If someone steals all your virtual money, you're out of luck.
Outside of individual consumers, David Cotney, commissioner of banks, Massachusetts Division of Banks, testified that Bitcoin's lack of regulatory oversight adds even bigger concerns, including money laundering, national security and tax evasion. With that in mind, Cotney stressed the importance of banking regulators and lawmakers working together to determine ways to effectively monitor the emerging world of virtual currency.
What do you think of Bitcoin? Does dealing with virtual funds instead of physical dollars and cents sound appealing to you?