Tags: Bitcoin | Carper | payments | system

Senate Committees Look at Alternative Currencies — Part II

By    |   Thursday, 21 Nov 2013 01:08 PM

As explained in the first article in this series, this article covers the testimony of industry witnesses at the hearing on alternative currencies held by the Senate Committee on Homeland Security and Governmental Affairs on Nov. 18 at which Sen. Tom Carper, D-Del., was the only congressional attendee. As one who has known the senator since he began serving on what is now the House Financial Services Committee in 1983, it is fair to say that he is not a scintillating interrogator of witnesses. As a beaver instinctively builds dams, Carper works diligently to ferret out consensus among a panel of witnesses, even where it already exists.

On the industry panel, Ernie Allen, CEO of the International Centre for Missing and Exploited Children, explained that he became interested in alternative currencies because they were used as a form of payment by some of the criminals who traffic in drugs and child pornography and exploit children for illicit purposes.

Patrick Murck, general counsel of The Bitcoin Foundation, described in detail how Bitcoin works and drew the analogy to the web, which has no central authority. The mythical creator of Bitcoin may not actually exist, and even if he or she does, the role of any individual diminishes over time as more people contribute and the service evolves. I was thinking along with Carper as he quipped that perhaps Bitcoin was actually created by Al Gore.

Jeremy Allaire, CEO of Circle Internet Financial, testified that Bitcoin emerged from the 2008 episode of the ongoing financial crisis as users of the payments systems sought ways to employ technology to create "a resilient yet decentralized platform for finance." He asserted that there is broad agreement that the current payments systems are "cumbersome and inefficient and very much built upon systems and processes that are decades old."

He called this state of affairs an "implicit tax" on the productivity of the global economy, and he decried the time and expense involved in transmitting money under the legacy system compared with the cheap and fast service made possible by the web. Allaire stressed that in building its products, Circle complies with all applicable rules and regulations that govern the payments system, and he predicted that the transformation of the old payments system into a more efficient one would take 20 years.

Jerry Brito, a senior research fellow at The Mercatus Center of George Mason University, elaborated on the fact that the decentralized nature of the Bitcoin platform practically eliminates fees for money transmission and enables service providers to experiment and innovate freely. He urged that as Bitcoin moves forward, policymakers do their best to establish a workable framework for compliance, so that the United States can compete globally with services available in other countries that are competing to establish leadership of the international payments system.

Brito noted that while The Bitcoin Foundation is central to the alternative currency community, it does not represent the entire industry, so it is important to solicit the widest possible participation in designing a regulatory framework that enables the efficiencies Bitcoin offers to be fully realized.

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Robert-Feinberg
This article covers the testimony of industry witnesses at the hearing on alternative currencies held by the Senate Committee on Homeland Security and Governmental Affairs on Nov. 18 at which Sen. Tom Carper, D-Del., was the only congressional attendee.
Bitcoin,Carper,payments,system
515
2013-08-21
Thursday, 21 Nov 2013 01:08 PM
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