Investors: Oversight Is Needed For Bitcoin To Become Mainstream

Bitcoin's growth was built on the idea it was a currency of the people, unattached to any central bank or regulating authority. But a major theft has put that vision to a tough test.

(SOUNDBITE OF MUSIC)

LINDA WERTHEIMER, HOST:

It's MORNING EDITION from NPR News. I'm Linda Wertheimer.

DAVID GREENE, HOST:

Enzyme David Greene.

Let's return to the saga of bitcoin, the digital currency. Yesterday, "Newsweek" announced that it uncovered bitcoins founding father - but the man they named - Dorian Satoshi Nakamoto - denied it. Just last week, the bitcoin world was rocked by a half billion dollar bank robbery.

This all might seem like the plot of a thriller that would at least delight a tech savvy audience. Though, NPR's Steve Henn reports that many Silicon Valley investors believe bitcoin is on the verge of breaking into the main stream, all it needs is a little government oversight.

STEVE HENN, BYLINE: If you put all the drama aside for a second, there actually is something to bitcoin. This digital currency allows people to exchange money directly online - without involving a bank or a credit card company - or any fees.

That simple fact has attracted the attention of some of the most successful venture capitalist on the planet. They're betting bitcoin could be the basis of a new, more efficient form of electronic commerce. But they say its time for this crazy-crypto currency to shed its freewheeling libertarian past and embrace regulation.

JEREMY LIEW: We really have a relatively small number of people in the bitcoin ecosystem today. And for it to really reach its full potential, it really needs to be much, much more widely accepted.

HENN: Jeremy Liew is a VC who's investing in a half dozen bit-coin-based businesses. He envisions a future where bitcoin is as widely used as Amex.

LIEW: For that to happen, then the general public has to have trust in bitcoin. You know, a lot of that trust can come from, you know, government oversight, government regulations.

HENN: But government regulation isn't what many of bitcoins early advocates signed up for. They saw a peer-to-peer payment network that let people deal directly with each other - safely and cut out banks and regulators.

ROGER VER: People can send or receive these bit-coins with anyone anywhere on the planet and they don't have to ask for permission from any bank, or corporation or government for that matter.

HENN: Roger Ver is an ardent bitcoin advocate an early adopter. He's a prolific investor in bitcoin-based businesses and a libertarian. Ver's horrified by the push to regulate bitcoin businesses in the U.S.

VER: Yeah. I think that sort of thing is my biggest fear in my to day life. All the rules and regulations the government makes are impossible for any one person to understand or abide by, there's just too many of them.

HENN: U.S. banks are required to reports suspicious transactions - to quote, "know their customers" - and to take steps to stop money laundering.

Roger Ver is more focused on privacy. One of Ver's most successful investments is in a business that helps people create bitcoin wallets without giving up any personal information. It's not entirely clear if a businesses like that is abiding by U.S. laws or not.

VER: Lots and lots of my bitcoin friends, they've literally left the country because the regulations and rules are just too burdensome in the U.S. And, you know, I've left the country myself as well.

HENN: Roger Ver in the Caribbean. But not every bitcoin business is heading off shore.

BRIAN ARMSTRONG: This is Brian Armstrong. I'm the CEO and co-founder of Coinbase.

HENN: Coinbase is trying to make using bitcoin easy. It's based in San Francisco and is scrupulous about following U.S. financial laws.

ARMSTRONG: You know, we have certain obligations to know our customers and collect personally identifiable information. So Coinbase is not, you know, anonymously in any way, really.

HENN: The company is working with auditors to release financial statements. They're reaching out to state bank regulators and Feds at Treasury and the Secret Service, to explain the currency and how they do business.

Armstrong's goal isn't to over turn the U.S. banking system or undermine regulators - his goal is to integrate bitcoin into the mainstream.

ARMSTRONG: The vast majority of transactions in the economy are for perfectly legal goods and services and they're not from people who are politically oppressed or anything like that.

HENN: If government oversight is going to help Americans get comfortable with the idea of actually using a crypto-currency, Armstrong is all for it.

Steve Henn, NPR News, Silicon Valley.

Copyright © 2014 NPR. All rights reserved. Visit our website terms of use and permissions pages at www.npr.org for further information.

NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.