The value of Web-based Bitcoin is soaring after senior U.S. officials told a Senate hearing the virtual currency offers "legitimate" financial services.

The Wall Street Journal wrote Nov. 18 that Mythili Raman, acting assistant attorney general for the U.S. Department of Justice's criminal division, said during the hearing that the Department of Justice "recognizes" that many virtual currency systems offer "legitimate" financial services and have "the potential to promote more efficient global commerce."

Ben Bernanke, chairman of the Federal Reserve, was not present during the hearing but wrote a letter to the Homeland Security committee ahead of the meeting. Virtual currencies "may hold long-term promise, particularly if the innovations promote a faster, more secure and more efficient payment system," he wrote.

Bernanke's remarks led to increased enthusiasm for the digital currency. Tokyo-based currency trading website Mt. Gox, generally considered to be the world's largest Bitcoin exchange platform, reported a value of $900 on Nov. 18 before it fell back to $732 at 1:12 p.m. ET on Nov. 19.

Last month, Bitcoin's average price was about $200.

The Washington Post called the Senate hearing "a Bitcoin lovefest," writing that all of the Barack Obama administration officials who testified said Bitcoin has legitimate users and urged regulators not to hold back innovation in the virtual money market.

Garrick Hileman, an economic historian at the London School of Economics, thinks Bernanke's comments and the Senate hearing have certainly helped Bitcoin.

"Regulatory interest in Bitcoin traditionally has a positive effect on the price of Bitcoin," he told SNL Kagan.

Introduced in 2008 as a peer-to-peer electronic cash system, Bitcoin is an open-source protocol and not managed by any central authority. Bitcoins can be transferred through a computer or smartphone without the interference of a financial institution. Based on digital signatures, payments can be processed to and from Bitcoin addresses, often referred to as "public keys," which can be stored in a wallet file onto someone's computer.

As Bitcoin is a currency, several businesses accept them as payment. Many Bitcoin users purchase products and services that range from music and adult films to consumer electronic products or niche social networking sites.

"Looking at it from a distance, it very much looks like it could be a speculative bubble," London-based Jan Lambregts, global head of financial markets research at the Rabobank, told SNL Kagan.

He explained that Bitcoin trading is a small market, while there is a lot of interest, so that is "inflating and distorting" the price.

Because Bitcoin transactions are broadcast to an entire network of computers, it is usually difficult to associate Bitcoin identities with real-life identities. Bitcoins are often used for international payments and mobile payments, as no card, PIN code or signature is needed. The virtual currency is often used by money launderers, hackers and organized Internet criminals to defraud companies and individual users of the currencies.

That is why Lambregts understands the "concerns" of many governments.

"This is a currency outside their normal domain and which is not influenced by central banks," he said, adding it is time for regulators to start looking at Bitcoin.

"It may all be relatively small-scale now, but decisions taken now could have wider repercussions were such virtual currency experiments to be expanded in the future," Lambregts warned.

Bernanke, however, expressed no intention to regulate the currency anytime soon.

Despite the Federal Reserve monitoring developments in the virtual currencies market and other innovative payments systems, the Fed "does not necessarily have authority to directly supervise or regulate these innovations or the entities that provide them to the market," Bernanke wrote.