Wild day for Bitcoin: currency cracks $700, feds say no new laws are needed

Don’t expect the Bitcoin hype to die down anytime soon. On Monday, the virtual currency got a possible plug from America’s top banker, while law enforcement officials told a Senate hearing they don’t need new powers to oversee it. Meanwhile, Bitcoin traded at record new levels — some reports have it as high as $750 — even as tech types gossiped about a website that proposes to use Bitcoin as a way to crowdfund political assassinations.

Amidst the hype, the most serious development was the testimony in the U.S. Senate, where officials from the Justice Department, the Secret Service and money-laundering investigator, FinCen, told Sen. Tom Carper (D-Del) that there is nothing inherently illegal about virtual currencies.

While the officials described the role of Bitcoin on illegal goods bazaars like Silk Road, they added that existing Patriot Act and money lending rules are adequate to prosecute people who use Bitcoin for criminal activities — while noting that the virtual currency is still dwarfed by Western Union and other banking services that people use to move money for both legal and illegal purposes. A U.S. Attorney compared Bitcoin to the emergence of other newer payment forms, including stored gift cards and the ACH network.

Surprisingly, one of the biggest areas of discussion was how to regulate Bitcoin in a way that didn’t impede its development or make the United States less competitive for the growing business ecosystem surrounding the currency.

“Whether digital currencies prove to be a boom or bust, some folks just want a chance to try and to play by the rules,” noted Sen. Carper.

Overall, it was a good day for Bitcoin on the Hill, and one that coincided with the publication of a letter by Federal Reserve Chairman Ben Bernanke that said virtual currencies “may hold long-term promise.”

At currency exchanges, Bitcoin’s value surged again — at over $700, it’s now worth almost double the $400 it hit just last week. Bitcoin believers might see this is as validation of the Winklevoss twins’ theory that one Bitcoin will be worth $40,000; for the flip side, see this alarming account that the recent high values are the result of a giant short squeeze.

Meanwhile, on Reddit, people are sharing stories about rediscovering the handful of old Bitcoins they bought years ago when it was worth nearly nothing at all.