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© Reuters. An illustration photo of Bitcoin (virtual currency) coins that are seen at La Maison du Bitcoin in Paris© Reuters. An illustration photo of Bitcoin (virtual currency) coins that are seen at La Maison du Bitcoin in Paris

By Michelle Price and Pete Schroeder

WASHINGTON (Reuters) – Digital currencies such as bitcoin were in the spotlight again on Tuesday as lawmakers in the U.S. Senate questioned top markets watchdogs over how to better regulate the highly volatile and risky emerging asset class.

Christopher Giancarlo, chairman of the Commodity Futures Trading Commission (CFTC), and Jay Clayton, chairman of the Securities and Exchange Commission (SEC), gave testimony to the Senate Banking Committee amid growing global unease about the risks virtual currencies pose to investors and the financial system.

The hearing follows a rout in the price of bitcoin, which has lost about half its value since the start of the year on concerns ranging from a global regulatory clampdown to a ban by some banks on using credit cards to buy bitcoin.

In his opening remarks, Senate Banking Committee Chairman Mike Crapo raised concerns about the volatility, investor protections, and the risks posed by cyber criminals highlighted by the recent theft of $530 million from Japanese bitcoin exchange Coincheck by hackers.

“Between the enforcement actions brought by your agencies, the hack of the international Coincheck exchange, and the concerns raised by various regulators and market participants, there is no shortage of examples that increase investor concerns,” the Republican lawmaker told Giancarlo and Clayton.

But Crapo also said the underlying virtual currency distributed ledger technology has “significant positive potential” to increase investor access to the financial markets.

In their opening remarks, Clayton and Giancarlo showcased the efforts their agencies have made to police the market and to highlight limitations in the regulatory structure. Clayton said Congress may need to change federal laws to help better regulate the emerging asset class.

On the Luxembourg-based Bitstamp exchange, bitcoin was 6.1 percent higher at $7,293.84 in early morning trading in New York on Tuesday. U.S. stock markets were slightly lower in volatile trading after two days of heavy losses.

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