Officials Broaden Inquiries Into Oversight of Bitcoin and Other Currencies

State and federal officials are starting broad investigations of shortcomings in the oversight of upstart virtual currencies like bitcoin.

The Senate’s committee on homeland security this week sent a letter to all the major financial regulators and law enforcement agencies asking about the “threats and risks related to virtual currency.” These currencies, which have grown in popularity in recent years, are often used in online transactions that are not monitored by traditional financial institutions.

“This is something that is clearly not going away and it demands a whole government response,” said a person involved in the Senate committee’s investigation, who spoke on the condition of anonymity because the inquiry is continuing.

The Senate letter went out the same day that New York’s top financial regulator, Benjamin Lawsky, sent subpoenas to 22 companies that have had some involvement with bitcoin, according to a person briefed on the investigation.

Previously, there have been isolated efforts to crack down those who took advantage of virtual currencies. But the two investigations made public this week appear to be the most wide ranging government efforts to exert more coordinated control over what has been a largely faceless and borderless phenomenon.

Bitcoin, the most well-known digital currency, was started by anonymous Japanese computer programmers in 2009 and was intended to serve as an alternative to national currencies. Only a limited number of new bitcoins can be created and an online community has bid up the price of an individual bitcoin, which are stored digitally on a decentralized network of computers. On Tuesday, a bitcoin was being sold for about $108 online.

Lawmakers are worried that bitcoin and other alternative forms of money can be used to evade taxes, defraud investors and facilitate trade in illegal products like drugs and pornography.

Last month, the Securities and Exchange Commission accused a Texas man of profiting from a bitcoin Ponzi scheme on the same day it issued a broader warning about the dangers of similar scams. Earlier this year, the operators of another virtual currency, Liberty Reserve, were accused of running a $6 billion money laundering ring.

The Senate committee began looking into virtual currency a few months ago, formally interviewing several regulators and industry participants. The committee recently stepped up its efforts because staff members heard “real concern” from law enforcement officials, and because it became clear that regulators did not have enough information about the technology, according to the person involved in the inquiry.

“The federal government must make sure that potential threats and risks are dealt with swiftly,” the letter said.

Both the Senate committee and Mr. Lawsky have emphasized that the technology could have good uses, and any new regulations would help protect those.

But Mr. Lawsky, in a formal notice released Monday, said that “if virtual currencies remain a virtual Wild West for narcotraffickers and other criminals, that would not only threaten our country’s national security, but also the very existence of the virtual currency industry as a legitimate business enterprise.”

Mr. Lawsky’s office sent subpoenas to most of the companies who have publicly discussed investing in bitcoin or creating software that allow for the transfer and exchange of bitcoins.

“It is in the common interest of both the public and the virtual currency industry to bring virtual currencies out of the darkness and into the light of day through enhanced transparency,” Mr. Lawsky’s notice said.