By Ryan Tracy
Backers of the virtual currency bitcoin are beefing up their Washington presence as they seek to shape government oversight of the fledgling payment system.
The effort has been building since a number of federal agencies began examining bitcoin last year, but reached a milestone on Wednesday when the Bitcoin Foundation, the top trade organization for the new technology, announced it had retained a lobbying firm for the first time.
The foundation hired Thorsen French Advocacy, a firm led by two former bipartisan congressional staffers, reflecting the group's desire to win support on Capitol Hill at a time when it's trying to influence an array of policy decisions. At least 13 U.S. government agencies have examined bitcoin, the Government Accountability Office said in a report last month.
The lobbyists' role will be to build "a reservoir of goodwill that we can deploy when we need to avert a crisis," said Jim Harper, global policy counsel for the foundation, on a call with reporters Wednesday. "The best work will head off problems before they become interesting to all of you."
Introduced in 2009, bitcoin is an online payment system that allows users to transfer digital "coins" for goods or swap them for dollars or other currencies. The technology made several leaps in the way money can be moved online, sparking a wave of startups and Silicon Valley investments.
But whether bitcoin itself thrives will depend in large part on how Washington treats it. More regulatory requirements for bitcoin companies, higher tax charges, or other government actions could make bitcoin more expensive, undercutting some of its advantages over other ways of transferring money.
So far, bitcoin has had a rocky ride in Washington. It started receiving attention in the capital in 2011 when Sen. Chuck Schumer (D., N.Y.) and others found it was being used to fuel an online black market for drugs and other illicit activity. The Bitcoin Foundation's former vice chairman, Charles Shrem, has been charged with money laundering and other crimes in connection with the black market, known as Silk Road. He has pleaded not guilty.
Late last year, former Federal Reserve Chairman Ben Bernanke and other officials said bitcoin holds promise if it can promote a more efficient global payment system. But the collapse of a popular bitcoin marketplace in February and subsequent allegations of consumer fraud brought regulatory scrutiny and led to rebukes, including a call from Sen. Joe Manchin (D., W.V.) to ban bitcoin.
Government agencies have also taken a number of actions that could help make bitcoin more legitimate, but also may add to its cost. For instance, an arm of the Treasury Department said last year that businesses exchanging bitcoins must follow anti-money-laundering rules. The Internal Revenue Service in March classified bitcoin as property rather than currency--a move that allows bitcoin businesses to file tax returns but crimps the currency's usefulness because it will require tax reporting even on everyday transactions.
Rep. Steve Stockman (R., Tex.), introduced a bill in April that would reverse the IRS decision. It has zero co- sponsors, a statistic that the Bitcoin Foundation's new lobbying arm may try to change.
Mr. Harper said the foundation would be "prioritizing and going down a list" of key Washington players it hopes to convert to bitcoin supporters. "You can expect to see us do the same in Europe and do the same in major capitals around the world."
Write to Ryan Tracy at ryan.tracy@wsj.com
(END) Dow Jones Newswires
07-09-141119ET
Copyright (c) 2014 Dow Jones & Company, Inc.
July 09, 2014 at 09:21AM
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