Bitcoin could be as “big as the Internet” in reshaping the world and spurring economic growth, said a venture capitalist and well-known booster of the virtual currency.
“Virtual currency, particularly bitcoin, reminds me so much of that time in the early ’90s,” said Fred Wilson, a partner at Union Square Ventures. “We are at the beginning of an exciting time, not just for investors but for all of society.”
His comments came at a hearing Tuesday on the potential regulation of bitcoin. Conducted in lower Manhattan by New York state banking regulators, the hearing attracted other bitcoin enthusiasts, including Cameron and Tyler Winklevoss.
Virtual currencies have “serious and documented dangers,” said Benjamin M. Lawsky, superintendent of financial services for the state’s Department of Financial Services, who led the panel discussion.
The participants (which included SecondMarket founder Barry Silbert, Lightspeed Ventures partner Jeremy Liew and the Winklevosses) agreed that there should be some regulation but argued that too much would stifle innovation.
“While we need to regulate this kind of innovation, we need to do it in a way that does not reduce the amount of innovation,” Wilson said. “We need to regulate at the edges of the system, but we should not regulate how the system itself operates.”
Bitcoin investors are betting that it will be a major disruptor in the financial payments industry and will prompt the creation of businesses using the currency’s platform.
But bitcoin’s potential as a money-laundering tool threatens to outweigh its benefits in the eyes of regulators.
“What we don’t want is to have a world where bitcoin and virtual currency is a safe haven for those who are committing illicit activities,” Lawsky said.
“If the choice ultimately is between preventing money laundering on the one hand or permitting innovation on the other, we’re always going to choose squelching money laundering first,” he said. “The question is whether we can get somewhere in between and feel very comfortable that we are preventing money laundering while enabling innovation.”
Lawsky pointed to the recent arrest of the CEO of a bitcoin exchange who is accused of participating in a money-laundering scheme as an example of what regulators are looking to avoid.
But the entire system shouldn’t be held back because of a few bad players, panelists said.
“Are people still doing bad things with bitcoin? Sure. Is the majority of its use this kind of activity? Not a chance,” Wilson said. “I think people do dumb things, but I don’t think the vast majority of people who are using and spending bitcoin are doing dumb things.”
Image credit: CC by Joi