Bitcoin price: exchange rate soars above $600 ahead of US Senate hearing

Letter from US Federal Reserve chairman highlights the "long-term promise" of virtual currencies

Software engineer Mike Caldwell shows the front (R) and back, hologram side, (L) of a physical Bitcoin he minted in his shop on April 26, 2013 in Sandy.

The exchange rate for Bitcoins has leapt to their highest ever prices as the market for digital crypto-currency prepares for the possibility of US regulation.

The U.S. Senate Committee on Homeland Security and Governmental Affairs (HSGAC) will hear testimony at 3.00pm EST today (8.00pm GMT) that although the virtual currency can be exploited by criminals it could offer a secure and speedy service if properly regulated.

This is according to submissions made before the hearing, which will bring together representatives of the Bitcoin community as well as officials from US regulatory bodies.

The value of Bitcoin soared to $618.94 on the Tokyo-based Mt Gox exchange as investors prepared for the possibility that the currency could move closer to regulation.

The HSGAC committee began gathering materials for the hearing as early as April this year, although recent events – including the shutdown in October of online drug marketplace the Silk Road and the millions of dollars of investment in the Chinese Bitcoin exchange BTC China – have put pressure on the US government to respond to the currency’s growth.

In a letter written ahead of the congressional hearings US Federal Reserve chairman Ben Bernanke states that although the Federal Reserve “does not necessarily have authority to directly supervise or regulate” virtual currencies, such innovations may hold “long-term promise, particularly if the innovations promote a faster, more secure and more efficient payment system.”

“In general,” writes Bernanke, “the Federal Reserve would only have authority to regulate a virtual currency product if it is issued by, or cleared or settled through, a banking organization that we supervise.”