Bitcoin is a digital virtual currency that can be traded on exchanges or used as a form of payment. They are created, or “mined,” using computers that are also processing Bitcoin transactions. The total number of Bitcoins is capped at 21 million to avoid inflation. Supporters of Bitcoin tout its decentralization, privacy controls and its ability to move payments quickly across the globe.

Transparency is a concern for regulators and law enforcement, who are worried virtual currency markets could be used for money laundering and tax avoidance. For instance, the identities of Bitcoin users are not always disclosed even though transactions are retained and made public.

The Senate committee’s interest, the most substantial yet from Congress, follows a flurry of Bitcoin-related activity this year at the state and federal level as well as in the courts.

The most immediate regulatory hurdles for Bitcoin businesses involve registration and compliance requirements from the Treasury Department, which is working to combat money laundering related to drugs and terrorism, and the states, which have their own consumer protection laws. The Treasury’s Financial Crimes Enforcement Network released guidance in March.

Last week, New York Financial Services Superintendent Benjamin Lawsky sent subpoenas to 22 Bitcoin businesses. In a follow-up memo Monday, he said his department is considering whether to issue new “regulatory guidelines” for virtual currencies rather than applying existing rules for money transmission, such as wire transfers.

“I’m thrilled, in a way, that Carper’s committee is stepping up, which might sound strange,” Bitcoin Foundation general counsel Patrick Murck said. “The actions that New York state took today just demonstrated the need for oversight of regulators in this space.”

Murck called Lawsky’s subpoenas “extremely onerous and broad” with a document request that “would cost almost the entire budget of a startup.”

“I guess maybe we’re shocked that it’s happening so soon,” said Jeff Ownby, vice-president of marketing and ecommerce for Butterfly Labs, a Lawsky subpoena recipient that sells hardware used in Bitcoin mining.

The SEC is pursuing a Ponzi scheme involving Bitcoins. Last week, a federal judge handed the agency an early victory by saying the case could proceed because Bitcoin is money and that investments in the alleged fraud, called Bitcoin Savings and Trust, are securities.

Earlier this year, Cameron and Tyler Winklevoss of Facebook fame began the process of seeking SEC approval to operate Winklevoss Bitcoin Trust, which will sell shares to investors who want to make money off of the changes in the value of Bitcoins without have to own the virtual currency. The exchange rate for a Bitcoin on Monday was around $106 according to the Mt.Gox exchange.

With the increased government scrutiny, some Bitcoin market participants want to raise the community’s profile in Washington. The Bitcoin Foundation, a non-profit group whose membership includes representatives from Bitcoin firms, is looking to possibly hire lobbyists.

Coinsetter Chief Executive Jaron Lukasiewicz, whose firm received a subpoena from Lawsky, said companies in the Bitcoin space have “done a bad job” of communicating with regulators to date.

“Regulatory uncertainty right now is the bottleneck for innovation in this space,” Murck said. “It’s been like that for a while.”