By Douwe Miedema
WASHINGTON (Reuters) - A powerful Senate Committee has started an inquiry into Bitcoin and other virtual currencies, asking a range of regulators to list what safeguards are in place to prevent criminal activity.
The Senate Committee on Homeland Security and Government Affairs in an August 12 letter to Secretary of Homeland Security Janet Napolitano also said it had started interviewing people about the risks - and promises - of virtual currencies.
Virtual currencies "can be sent nearly anonymously, leaving little or no trail for regulators or enforcement agencies," said the letter, which was signed by the committee's Chairman Tom Carper, a Democrat from Delaware, and ranking member Tom Coburn, an Oklahoma Republican.
"Their near anonymous and decentralized nature has also attracted criminals who value few things more than being allowed to operate in the shadows," the senators wrote.
Identical letters were sent to the U.S. Department of Justice, the Federal Reserve, the Treasury, the Securities and Exchange Commission and the Commodity Futures Trading Commission, a spokeswoman for the committee said.
The senators had asked these agencies to list any policies or procedures in place to regulate virtual currencies, any information on how they were cooperating with other agencies and any other initiatives in the area.
The Senate committee had been interviewing "individuals inside and outside of government" on the threats and risks related to virtual currencies, the letter added.
The lawmakers' interest comes among increased scrutiny of virtual currencies, electronic money that can be passed between parties without traditional banking or money transfer systems, of which Bitcoin is the most prominent one.
This week, a memo showed that New York's top banking regulator Benjamin Lawsky - superintendent of the New York Department of Financial Services - is considering issuing guidelines to regulate virtual currencies.
The virtual currency industry has also been the subject of enforcement actions and other attempts to crack down on potential wrongdoing.
In May, U.S. prosecutors filed an indictment against the digital currency exchange Liberty Reserve, accusing the Costa Rica-based company of helping criminals around the world to launder more than $6 billion in illicit funds.
Tokyo-based Mt. Gox, the world's largest exchanger of U.S. dollars with Bitcoins, had two accounts held by its U.S. subsidiary seized this year by agents from the Department of Homeland Security on the grounds that it was operating a money transmitting business without a license.
The Federal Bureau of Investigation last year reported Bitcoin was used by criminals to move money around the world, and the U.S. Treasury in March said that digital currency firms were required to stick to anti-money laundering rules.
(Reporting by Douwe Miedema; editing by Karey Van Hall, G Crosse)