It’s been a brutal week for Bitcoin. First, Mt. Gox, the world’s largest exchange for trading the virtual currency shut down late Monday after possibly losing hundreds of millions of dollars in customers’ Bitcoins. Now a U.S. senator is pressing for a complete ban on the cryptocurrency.
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“This virtual currency is currently unregulated and has allowed users to participate in illicit activity, while also being highly unstable and disruptive to our economy,” Sen. Joe Manchin (D-WV) wrote in a letter to Treasury Secretary Jack Lew and Federal Reserve Chair Janet Yellen, among others.
Bitcoin, which is not backed by a central bank and can be traded privately or on a handful of exchanges, had catapulted into the mainstream in recent months, with Overstock.com, restaurants and hotel chains agreeing to accept it as payment.
The currency is best known, though, as the Internet black market’s currency of choice. Just last fall, federal law enforcement officers shut down Silk Road – a hidden online marketplace known as the “eBay of illicit goods” where people used Bitcoin to purchase drugs, guns, prostitutes and other illicit goods and services.
With its popularity growing, federal and state officials have considered new regulations on the currency. Lawmakers on Capitol Hill have proposed making Bitcoin subject to the same anti-money laundering law as traditional currency. Manchin’s letter is the first proposal to ban it all together.
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The senator listed Thailand and China among countries that have already banned Bitcoin as well as others that have issued warnings to users of the digital currency.
“Our foreign counterparts have already understood the wide range of problems even with Bitcoin’s legitimate uses - from its significant price fluctuations to its deflationary nature,” Manchin wrote. “I am most concerned that as Bitcoin is inevitably banned in other countries, Americans will be left holding the bag on a valueless currency.”
Bitcoin’s latest troubles come on the heels of a rough month for the multi-billion market, which suffered cyberattacks on several exchanges, including Mt. Gox, as well as a sharp decline in value. Bitcoin's price on Mt. Gox fell to about $135 from $828.99 before February 7, according to Reuters. With the exchange closed, Mt. Gox users may have lost more than $300 million worth of Bitcoins, according to the Los Angeles Times.
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