Attorney General Eric Holder said the U.S. Justice Department is working to keep pace with Bitcoin and other virtual currencies to short-circuit their use in buying and selling illegal goods.
Testifying before the House Judiciary Committee today in Washington, Holder said that virtual currencies “can pose challenges for law enforcement given the appeal that they have among those seeking to conceal illegal activity.”
Holder said his department “is committed to innovating alongside this new technology in order to ensure investigations are not impeded by any improvement in criminals’ ability to move funds anonymously.”
Regulators and law enforcement authorities across the globe are grappling with how to handle Bitcoin and other virtual currencies, which use a public ledger to record transactions made under pseudonyms, a technological breakthrough that allows purchases and sales without using a trusted third party, such as Visa Inc. or Western Union Co.
Founded in 2008, Bitcoin has gained traction with merchants selling legitimate products while it also has appeal for those seeking to facilitate illegal transactions because they can be difficult to track.
“As virtual currency systems develop, it will be imperative to law enforcement interests that those systems comply with applicable anti-money laundering statutes and know- your-customer controls,” Holder said.
Tax authorities also are figuring out how to deal with Bitcoin. The U.S. Internal Revenue Service last month ruled it will treat Bitcoin as property for tax purposes, applying rules it uses to govern stocks and barter transactions.