MercoPress. South Atlantic News Agency

Fed asks US Congress to look into legal option for regulating virtual currencies such as bitcoin

Any regulation of the bitcoin crypto-currency should involve international cooperation, said Japanese vice finance minister Jiro Aichi

The US Congress should look into legal options for regulating virtual currencies such as bitcoin, said Federal Reserve Chair Janet Yelleny. Japan-based bitcoin exchange Mt. Gox went dark leaving customers unable to access their accounts. Experts have warned they might not have much recourse to recover their money.

 Yellen said the Fed had no jurisdiction over bitcoins, which are created using a network of computers that solve complex mathematical problems and are not traded or held by banks.

“The Fed doesn't have authority with regard to bitcoin but it certainly would be appropriate, I think, for Congress to ask questions about what the right legal structure would be for virtual currencies that involve nontraditional players,” she said during a Senate committee hearing.

A Japanese finance official said earlier that any regulation of bitcoin should be international.

“Any regulation of the bitcoin crypto-currency should involve international cooperation to avoid loopholes”, Japanese vice finance minister Jiro Aichi said.

The Mt. Gox website and Twitter feed went blank on Tuesday after weeks of turmoil. It suspended withdrawals on Feb. 7 following a series of cyber attacks, leaving customers unable to recover their funds.

A document circulating on the internet saying that more than 744,000 bitcoins - worth around $423 million at current rates - were missing from Mt. Gox was created by a Tokyo-based consulting firm, said Ryan Selkis, a blogger who initially leaked scans of the document. Selkis, who uses the handle “twobitidiot”, said in an email that the “Crisis Strategy Draft” had been written by consulting firm Mandalah in meetings with Mt. Gox CEO Mark Karpeles.

While proponents of bitcoin hail its anonymity and lack of ties to traditional banking, regulators have become increasingly interested in the digital currency due to its volatility and usage by criminal elements.

Bitcoins are created, or “mined”, in a process using a network of computers that solve complex mathematical problems as part of a process that verifies and permanently records the details of every bitcoin transaction that is made. At current prices, the bitcoin market is worth about 7 billion dollars.