Bitcoin has been tossed into the virtual gutter at the World Economic Forum in Davos this week, as top US financial leaders warned the digital currency could be used to fund terrorism and predicted that regulation would put it out of business.

US Treasury secretary Jack Lew said: “From the government’s point of view, we have to make sure it does not become an avenue to funding illegal activities or to funding activities that have malign purposes like terrorist activities.

“It is an anonymous form of transaction and it offers places for people to hide,” Mr Lew said in a televised interview with CNBC at Davos.

Jamie Dimon, JPMorgan chairman and chief executive, told the same channel: “The question isn’t whether we accept it. The question is do we even participate with people who facilitate Bitcoin?”

Ultimately, Mr Dimon said, Bitcoin would be subjected to the same regulatory standards as other payment systems and “that will probably be the end of them”.

Regulatory uncertainty has deterred banks from offering services to virtual currency start-ups. But Mr Dimon’s cautious approach contrasts with rival Wells Fargo, which recently launched a group to examine how it might safely offer Bitcoin-related services or banking arrangements to virtual currency entrepreneurs.

The JPMorgan boss said: “Governments put a huge amount of pressure on banks, and so, to know who your client is, anti-money laundering, did you do real reviews of that? Obviously it’s almost impossible with something like that.”  Of course, Mr. DImon has tried hard to do just that.

Dimon added that Bitcoin was “a terrible store of value” that “can be replicated over and over,” and that according to reports, “a lot of it is being used for illicit purposes”.

The US Treasury secretary seemed to agree with the JPMorgan boss, saying: “I’ve talked to Jamie Dimon about it. I think he and I both share a certain incredulity about the whole phenomenon.”

The US Treasury declared last year that Bitcoin businesses must register as money services businesses and impose anti-money laundering checks on customers. Most of the 50 US states also impose their own regulations on money services businesses.

However, JPMorgan only last month filed a US patent application for a computerised payment system, which like Bitcoin would allow people to make anonymous, electronic payments over the internet, without having to reveal their name or account numbers.

Irish telecoms billionaire Denis O’Brien added his voice to the Davos sceptics of the virtual currency by saying he would avoid investing in Bitcoin.

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