U.S. Federal Reserve Investigates Online Payment Systems like PayPal and Bitcoin

The U.S. Federal Reserve has been investigating possible security risks in online payment systems ─ like PayPal and Bitcoin ─ and the effect that they may be having on the financial system, according to officials who gathered in Shanghai for the International Monetary Conference on Monday.

“We have been talking. . . with banking organizations over the last year or two, trying more carefully to understand what the concerns are with these new payment mechanisms,” said Federal Reserve Vice Chair Janet Yellen. “In point of fact, at least in the United States, there are regulations that apply. But that said, this is very much on our radar screen, and we are carefully trying to identify where the risks are.”

Yellen said that the United States already regulates popular online payment systems like PayPal, but this investigation is geared towards finding the best possible security measures for consumer protection now that digital currency use is on the rise.

It is no wonder that the Federal Reserve is a little concerned about safety after Liberty Reserve, an online Bitcoin exchange service, was charged with running a $6 billion dollar money laundering operation that facilitated the illegal trafficking of everything from drugs to child pornography.