Washington is grappling with how to govern cryptocurrencies, with many lawmakers struggling to understand against a steep learning curve how bitcoin and its brethren even work. The virtual currencies are blurring decades-old lines that regulators use to police financial markets, posing new challenges for state and federal officials.

Investors are eager for more clarity, but fear a knee-jerk reaction from Congress that could derail the cryptocurrency industry in its early years.  “Until they decide to think radically differently about how to regulate financial services, I don’t know how this is going to get resolved so cleanly,” a financial technology lobbyist told The Hill. Cryptocurrencies exploded in value and popularity in 2017 as investors caught on to the potentially disruptive power of tokens such as bitcoin and ethereum.

Virtual currencies run on a digital public ledger that updates several times an hour, verifying transactions quickly and cheaply without involving banks. As the value of cryptocurrencies exploded last year, traders began offering a slew of related futures and derivatives.

Dozens of companies — some legitimate, others fronts for frauds — sought to raise capital by offering their own virtual coins through “initial coin offerings” (ICOs). The proliferation of cryptocurrencies and the dizzying array of new investments have raised alarms with the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC), which have both issued warnings to investors about their difficulties policing cryptocurrencies and related investments.

“A lot of our laws are fairly old. They’re fairly dated,” Brian Knight, director of the right-learning Mercatus Center’s financial regulation program, told The Hill. Read more from thehill.com…

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