Political Donations and Equities Trading in Bitcoins Coming?

bitcoin

Bitcoin is a virtual currency that has no central bank, no oversight, and seems to be gaining acceptance worldwide. The Media is buzzing about Bitcoins and the FEC and Congress are trying to figure out how to deal with them. Investors are talking about them too as they have risen in value from a few dollars to over $700 a Bitcoin in recent weeks. However, virtual currencies such as  Bitcoins, just like their real-world cash equivalents, are completely anonymous which makes the regulators nervous. 

Originally created to help with direct online payments, such as buying or selling goods on eBay, they are currently being used to buy houses and even trading computers, but they are also being used to fund illegal activities. The anonymous nature of the crypto-currency makes it a favorite amongst online drug vendors and illegal Internet gambling operations. Now the FEC is looking into the possibility of allowing Bitcoins to be used to fund political activities.

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Earlier this week the US Senate’s Committee on Homeland Security and Governmental Affairs listened to groups on both side of the issue debate to see if virtual currency regulations would hurt or help American financial interests. The Obama administration officials at the hearing appeared to hold a very positive view on Bitcoins – which sent their values skyrocketing to previously unseen levels. While all three of the testifying administration officials agreed that virtual currencies could be used for criminal activities they underplayed the dangers and instead focused on the dangers of snuffing out innovation.

The hearing was more of a fact-finding mission rather than a full scale hearing into the matter. It was apparent after the mater concluded that it was aimed more towards understanding exactly what a Bitcoin was rather than how it should be regulated. However, the Federal Election Commission is set to make a ruling this week on allowing what might amount to anonymous donations to political action committees using the virtual currency.

The FEC just like the Senate committee is more interested in figuring out how cryptocurrencies may influence donor rules and existing disclosure laws. Even members of the commission admitted they are a bit more than just a little out of their element and have asked others with more experience with Bitcoins to comment on the matter before they can reach any conclusions.

None of this is stopping some brokerages from allowing the use of Bitcoins for Forex and equities trades. As a Bitcoins exist solely in electronic form, they can be kept on your trading computer or uploaded like a virtual wallet to your broker of choice. Bitcoin exchanges can convert your holdings into your currency of choice as well, making for a rather easy method for some brokers to transfer assets directly from or to your account. Nevertheless, as with all things digital there are risks. If you lose your virtual wallet you have lost all your money – but at least you would still have your driver’s license this time.

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