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WASHINGTON — The electronic currency known as bitcoin allows small- and medium-sized companies to reach more customers by opening new markets that were previously unreachable, the co-founder of a company that allows businesses to use bitcoins said in testimony Tuesday before two Senate subcommittees. And it appears that federal authorities are open to its development.
Tony Gallippi, the CEO of BitPay, testified before the Senate Subcommittee on National Security and International Trade and Finance and the Subcommittee on Economic Policy on "The Present and Future Impact of Virtual Currency." DSN previously reported on bitcoin, BitPay and whether the currency could catch on among pharmacy retailers.
Developed as a theory in a 2008 paper and introduced in early 2009, bitcoin has grown in popularity lately with investors, businesses and consumers. The currency works as a peer-to-peer system that allows direct payments between two parties who store their bitcoins in electronic wallets, protected by a system of cryptography, private keys and electronic signatures; like cash, they can be stolen, but unlike cash, they can't be counterfeited. In addition, they're virtually anonymous and have a finite supply.
But they have some unattractive qualities as well. Their anonymity makes them a popular means to buy contraband, such as illegal drugs, most infamously on the Deep website Silk Road, recently shut down by federal authorities, but soon after revived. They also are known to swing wildly in value: On Tuesday, the currency reached a value of $900 for one bitcoin before falling to $480.
"In order for bitcoin to flourish, it is imperative its susceptibility to illicit uses be addressed," one subcommittee member, Sen. Chuck Schumer, D-N.Y., said during the hearing. Gallippi responded, "We share in the common goal, to protect the consumers from fraud, and that legitimate service providers separate the good actors from the bad."
So far, federal regulators seem to have a positive view of the currency. "There are plenty of opportunities for digital currencies to operate within existing laws and regulations," the New York Times quoted Secret Service special agent Edward Lowery as saying; the Secret Service is in charge of protecting the integrity of the dollar.
Gallippi sees bitcoin as ideal for small businesses. "Credit cards were never designed for the Internet, and credit card fees are discriminatory; the highest fees are paid by the smallest businesses," Gallippi said in his testimony. "If you are a business owner, it is your fault that you took a stolen credit card, even if the bank approved it. Bitcoin is a cheaper, faster and more secure payment system, with no discrimination against smaller businesses."