West Virginia Democratic Sen. Joe Manchin intends to seek a ban on the popular digital crypto-currency Bitcoin, citing it as both “unregulated and unstable” in a letter to federal regulators.
“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,” the Democrat from West Virginia told a group of federal regulators, including Treasury Secretary Jack Lew and Federal Reserve Chairwoman Janet Yellen, on Wednesday.
Manchin described Bitcoin as “a haven for individuals to buy black market items,” citing the notorious “Silk Road” black market site where users could purchase drugs, guns and other illegal elements with Bitcoin until the FBI closed it down and confiscated more than $3 million-worth of the crypto-currency in October 2013.
The senator also said Bitcoin posed a danger to the U.S. economy at large, citing its recent volatile value fluctuations and deflationary nature caused by hacks like that of the Japanese Mt. Gox Bitcoin exchange site last week, where hackers took advantage of a software flaw to drain its value.
“News of plummeting or skyrocketing Bitcoin prices is almost a weekly occurrence,” Manchin said. “In addition, its deflationary trends ensure that only speculators, such as so-called ‘Bitcoin miners,’ will benefit from possessing the virtual currency. There is no doubt average American consumers stand to lose by transacting in Bitcoin.”
Each Bitcoin is identified by a public address and a private key, which allows for an anonymous and irreversible system of transactions online. Numerous countries including China and South Korea have already banned Bitcoin – a trend Manchin warns the U.S. needs to follow to avoid “holding the bag on a valueless currency.”
Last December’s Consumer Price Index recorded inflation at 1.3 percent, while a recent media report cited by Manchin put Bitcoin’s CPI at a deflationary rate of 98 percent.
“This flaw makes Bitcoin’s value to the U.S. economy suspect, if not outright detrimental,” Manchin said.