For Bitcoin, a successful charm offensive on the Hill

The pair of Bitcoin hearings held this week by Senate committees could have been a disaster for fans of the virtual currency. After all, Bitcoin first came to mainstream attention in 2011, after reports that it was being used to power a shadowy online drug marketplace called Silk Road.

Yet the tone of the hearings — held Monday by the Senate Homeland Security and Governmental Affairs Committee and Tuesday by the Senate banking committee — was overwhelmingly positive, with consensus that the federal government needs to be careful to avoid hampering the growth of the world’s first completely decentralized payment network.

That wasn’t a coincidence. The cordial atmosphere at the hearings was the culmination of months of careful diplomacy by Bitcoin advocates. Since the spring, leaders of the Bitcoin community and sympathetic policy advocates have been engaging with federal regulators, lawmakers and other influential figures inside the Beltway.

Bitcoin’s positive reception from policymakers was just one sign that the cryptocurrency is becoming increasingly mainstream. On Thursday, the largest private university in Cyprus, the University of Nicosia, announced it would allow tuition to be paid with bitcoins. Richard Branson’s Virgin Galactic said Friday that it would accept Bitcoin payments for space travel. And the Bitcoin start-up Bitpay says that 12,000 merchants have signed up to receive payments through its service.

That climb to respectability has been painstakingly managed by Bitcoin’s advocates, who faced a far different welcome on a previous visit to Washington. On June 13, many government officials got their first opportunity to meet senior figures in the Bitcoin community at a conference sponsored in part by the Center for Missing and Exploited Children. A major theme of one panel was the use of bitcoins to purchase child pornography, which led to a particularly tense exchange.

“Child pornography is like Bitcoin in some ways,” said panelist Andrew Oosterbaan, who prosecutes child pornography cases for the Justice Department. “It has intrinsic value to people who want it. . . . When you add an anonymous currency, you’ve taken individuals who are already incentivized to produce, given them a far more meaningful incentive to do so.”

“Bitcoin is nothing like child pornography,” shot back a visibly angry Patrick Murck, general counsel of the Bitcoin Foundation. “If there was one instance of a child being abused because of Bitcoin, that’s one too many. I’m a father; I think there’s a special place in hell for people who do that.”

But Murck also stressed that the Bitcoin community is willing to work with federal regulators. “I want to craft a sane regulatory environment,” he said, urging regulators to “engage stakeholders.”

Despite the sometimes confrontational tone, that conference was a turning point. Behind the scenes, Murck met keynote speaker Jennifer Shasky Calvery of the Financial Crimes Enforcement Network, which enforces the nation’s laws against money laundering. Their conversation led to a meeting in August between regulators and Bitcoin advocates.