WASHINGTON—Bitcoin and other virtual currencies have great potential to reshape the financial-services industry, but policy makers should act quickly to establish a framework for their regulation, a top U.S. commodities regulator said.

Mark Wetjen, a Democratic member of the Commodity Futures Trading Commission, said in an op-ed for The Wall Street Journal that bitcoin could provide “tremendous benefits” to individuals, particularly those in the developing world with limited access to banks, as well as people who rely on mobile-payment systems on their smartphones.

To realize these benefits, federal regulators and the industry must address several high-profile bitcoin “challenges,” including the failure of the bitcoin exchange Mt. Gox and the virtual currency’s alleged ties to shady activity like the online drug bazaar Silk Road. The challenges have “shaken the public’s confidence in bitcoin,” he said, noting its value dropped last week to $323 from a high of $650 in July.

“Rarely can derivatives regulators anticipate a new market’s potential benefits while devising an appropriate regulatory framework,” Mr. Wetjen said. “But virtual currencies such as bitcoin, and other competing protocols and related technologies, represent such an opportunity.”

Mr. Wetjen’s comments come amid growing momentum for bitcoin around the world, as amateur investors, venture capitalists and technology enthusiasts pump money into businesses that are trying to figure out how to use bitcoin to buy and sell goods and services. A growing number of merchants accept bitcoin because the transaction costs associated with the currency are generally lower than those for using credit or debit cards.