Bitcoin hits $900 high after U.S. Senate hearing

The price of virtual currency Bitcoin rose to new highs on Tuesday after U.S. officials told a Senate committee hearing that virtual currencies are a "legitimate financial service".

The price of Bitcoin soared following the hearing. The currency rose to USD900 on the world’s largest Bitcoin exchange, the Tokyo based MT Gox before falling back to USD727.  This compares to a price of about USD200 in October.

The Homeland Security and Governmental Affairs Committee is examining the implications of the growing popularity of Bitcoin and other virtual currencies in the first hearing of its kind in Congress.

Witnesses at the Senate Homeland Security Committee hearing included officials from the Treasury Department, the U.S. Secret Service and the Department of Justice. 

“The Department of Justice recognizes that many virtual currency systems offer legitimate financial services and have the potential to promote more efficient global commerce,” Mythili Raman, the acting assistant attorney general of the Justice Department, said in testimony.

In a letter to the committee, Federal Reserve Chairman Ben Bernanke, who did not attend the hearing, said that virtual currencies “may hold long-term promise, particularly if the innovations promote a faster, more secure, and more efficient payment system.”

The Fed Chairman also warned that the bank could do little to regulate online currencies.

“Although the Federal Reserve generally monitors developments in virtual currencies and other payments system innovations, it does not necessarily have authority to directly supervise or regulate these innovations or the entities that provide them to the market,” he said.

Bitcoin is digital cash for the internet that isn’t backed by a central bank to regulate it or issue it. It can be used to purchase real goods and services. Its growing popularity has raised questions over whether and how it should be regulated. 

The anonymous nature of Bitcoinhas raised concerns over its use in criminal activity.

According to Bitcoincharts.com, a website that provides financial information about the currency, the value of all Bitcoins in circulation exceeded USD1.5 billion at the end of August 2013, with millions of dollars’ worth of Bitcoins exchanged on a daily basis.

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European stocks decline in cautious trade; Dax down 0.31%

European stocks were lower on Tuesday, as investors remained cautious amid ongoing speculation over when the Federal Reserve will begin scaling back its stimulus program. 

During European morning trade, the EURO STOXX 50 retreated 0.63%, France’s CAC 40 shed 0.62%, while Germany’s DAX 30 slid 0.31%. 

Global equities found support last week after dovish comments by Fed Chairwoman nominee Janet Yellen were seen as cementing the view that the bank will continue its USD85 billion-a-month asset purchase program well into the beginning of next year.

However, Federal Reserve Bank of New York President William C. Dudley said Monday he was growing more hopeful that the economy is improving, and added that the fiscal uncertainties that acted as a drag on growth are likely to abate in the coming months.

Investors were turning their attention to the minutes of the Fed’s October meeting, as well as a speech by Fed Chairman Ben Bernanke on Wednesday for further indications on the future course of U.S. monetary policy. 

Financial stocks were broadly lower, as French lenders BNP Paribas and Societe Generale tumbled 1.28% and 0.76%, while Germany's Deutsche Bank edged down 0.09%. 

Among peripheral lenders, Spanish banks BBVA and Banco Santander retreated 0.69% and 1.01% respectively, while Italy's Unicredit and Intesa Sanpaolo declined 0.43% and 0.49%. 

Elsewhere, Royal KPN NV surged 2.74% after Credit Suisse Group raised its rating on the phone company to "outperform" from "neutral", saying the stock will probably gain in value once the sale of KPN’s German business to Telefonica is completed. 

In London, commodity-heavy FTSE 100 slumped 0.54%, weighed by sharp losses in the mining sector. 

Shares in Glencore Xstrata retreated 1.37%, while rival companies Vedanta Resources and Fresnillo plummeted 2.33% and 2.46% respectively. 

Financial stocks were also on the downside, as Barclays dipped 0.01% and HSBC Holdings declined 0.42%, while the Royal Bank of Scotland and Lloyds Banking lost 0.95% and 1.39%. 

Meanwhile, EasyJet was the best performer on the index, up 5.81% after the discount carrier said it will pay an additional dividend after full-year profit climbed 51%. 

In the U.S., equity markets pointed to a steady open. The Dow Jones Industrial Average futures pointed to a 0.06% dip, S&P 500 futures signaled a 0.07% slip, while the Nasdaq 100 futures indicated a 0.09% loss. 

The market was looking ahead to the closely watched ZEW index of German economic sentiment, due out later Tuesday.

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