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When it comes to cryptocurrencies, the government giveth and the government taketh away.

On Wednesday, at a conference called Crypto Evolved in New York on bitcoin and other digital coins, regulators and government enforcement agents talked about their role in policing the growing industry. It was clear that digital coins continue to be used for illicit activities, even as more institutional investors have begun trading them like traditional securities.

Chris Ratcliffe/Bloomberg

At last check, the Federal Bureau of Investigation had 130 investigations connected to virtual currency, supervisory special agent Kyle Armstrong told the crowd. The cases involve topics including drugs, ransomware, kidnapping, and money laundering.

“Every investigation could have a nexus to virtual currencies,” said Armstrong, who manages the virtual currency initiative in the money-laundering, forfeiture, and bank-fraud unit.

The agency has a generally neutral view of virtual currencies themselves, he said. It can help that some virtual currencies are often more easily traced than cash, because they're tracked using software that records each transaction on multiple computers. But currencies designed for a higher level of anonymity can make it difficult for investigators.

While revelations about criminal activity are likely to drive investors away, regulation could attract more money to the area. A survey of crypto executives and investors released this week by law firm Foley and Lardner found that 84% of investors think the federal government, states, or both, should regulate new coins.

At a panel at the conference on the regulation of crypto markets, some officials talked about how government regulation could help marketplaces develop.

“I do feel like there’s a real, growing awareness of how regulation is going to help this market,” said Gary Goldsholle, deputy director of the Division of Trading and Markets at the Securities and Exchange Commission.

Institutional users will expect high levels of transparency and integrity in markets that trade digital assets, he said. (He noted at the outset that his thoughts were his own and not necessarily those of others at the SEC.)

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