Bitcoin to make first case to US Congress

Bitcoin, the virtual currency that fueled transactions on internet black markets such as Silk Road and Black Market Reloaded, will make its first case to the US congress today that such currency could potentially open the digital economy to poor societies around the world.

Federal law enforcement agents will testify against the virtual currency saying that Bitcoins could be used to launder money.

Federal agents, last month, shut down Silk Road, a black market that sold illegal goods such as heroin and forged documents, and arrested its alleged operator, Ross Ulbricht. The site operation happened on an underground network known as Tor and transacted its sales in bitcoin.

Patrick Murck, general counsel for the Bitcoin Foundation, will appear before the Senate Homeland Security Committee for the first congressional hearing on virtual currency.

He said in prepared testimony that he hoped Congress would "chart a safe and sane regulatory course" without tamping down the economic and societal potential for the digital economy and Bitcoin.

According to Murck, Bitcoin could help people avoid official corruption and punitive taxes and spend money on unpopular causes without risking interference from government. He added that fees were generally lower than traditional banking.

Meanwhile, to capitalise on the virtual currency's widely-projected returns this year, entrepreneurs are looking to get around regulatory uncertainty and open organised financial vehicles to investors.

SecondMarket has an offering called Bitcoin Investment Trust for qualified high-net-worth investors (because of bitcoin's inherent risk), and tech investors, the Winklevoss twins (they had sued Facebook founder Mark Zuckerberg for $140 million, claiming he stole their idea to create the social networking site) would launch an ETF that would track bitcoin's exchange rate and trade like a stock.

According to the two tech investors, bitcoin's market value had room to grow 100 times bigger. One of them, Cameron Winklevoss, who spoke to CNBC said, payments would increasingly use a network like the bitcoin network to move money around the world.

According to commentators he might be right, but for the time being, given the fact of the involvement of shady operators, that had surfaced in the last couple of months, the currency had acquired a dubious reputation. In addition to the Silk Road site, there were also several scams associated with the currency to boot.

In one of the most notorious,  Trendon Shavers set up a fund called the Bitcoin Savings Bank, took in cash from ''investors'' on a promise of 7 per cent weekly returns, then shut it down and fled with some 263,000 bitcoins.

Shavers has since been charged by the SEC with running a Ponzi scheme.