Government regulations will actually help bitcoin, not hurt it, digital currency entrepreneur Cameron Winklevoss says.
During a panel discussion at the NExT conference entrepreneurial event in New York, he said regulations will help give credibility to bitcoin, which has a reputation of being used by criminals laundering dirty money.
"If and when it does get more regulated, which I think, personally, in the bitcoin world, we love regulation. I don't want to facilitate bad uses of money as much as anybody else. So I don't really have an issue with that," the co-founder of Winklevoss Capital Fund said Thursday.
Bitcoin, an open-source digital currency, allows parties to transfer money without the use of traditional banking or money transfer systems. Its value fluctuates based on supply and demand.
Cameron and his identical twin Tyler, was not present at Thursday's event, are widely known for their legal battle with Facebook CEO Mark Zuckerberg. But the two have been making a splash on the venture capital scene with their investments in bitcoin. In April, they told The New York Times they had an $11 million stake in the digital currency.
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While Cameron Winklevoss said he sees huge potential in the bitcoin realm, he said his firm only considers investments in start-ups that are addressing government regulatory issues.
"It's easy for technologists to only want to focus on the technology aspect and how the company is being disruptive on that level. But sort of the part that is not as fun is dealing with regulation and getting all your ducks in a row. But it's also really sort of the most important parts," Winklevoss said. "The people who are not complying will lose their bank account and be shut down very quickly."
Although bitcoin simplifies the process of transferring money and is cheaper than traditional methods, it remains controversial because law enforcement and regulators see it as a way for criminals to launder money.
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But the argument against bitcoin based on criminal activity is hyped, said Charlie Shrem, founder and CEO of BitInstant, a bitcoin exchange that Winklevoss is invested in.
"When bitcoin first came out it was like the wild west," Shrem said. "Who are the first people who are going to use any kind of new technology? The ones who need it the most. Who are the ones who need to use any financial system the most? The ones being pushed out of the current financial system. So obviously, when the first software comes out, these are going to be the first ones who run to it."
Andrew Chang, a founding partner of Liberty City Investors, said during the event that bitcoin can actually be likened to the early Internet days before mainstream consumers had adopted it.
As more investments pour into bitcoin start-ups, more engineers and entrepreneurs will be attracted to it, and the image of its use by criminals will go away, Chang said.
"The reality of how many illicit transactions are happening [is] totally overblown. It's just a matter of time and education," he said.
Winklevoss said that the notion that more harm than good could come from bitcoin is flawed.
"For me, anonymity is just one of many offerings. Certainly, people will latch onto certain aspects of bitcoin, but I think there are so many things bitcoin does well," Winklevoss said.
One area where it could make a big impact is in micro-payments, Winklevoss said. He gave the example of using bitcoins to pay small fees online for access to content, like a quarter to read an article.
"People, generally, tend to latch onto the most exciting narrative," Winklevoss said. "It's exciting to say 'hey, what is this rogue currency being used to purchase all this illicit stuff?' But that narrative is definitely changing considerably and that comes with the maturity of the currency."
_ By CNBC's Cadie Thompson. Follow her on Twitter @CadieThompson.