Treasury Secretary Jack Lew called bitcoin a "phenomenon," but told CNBC on Thursday that the U.S. government needs to make sure the digital currency doesn't become a funding haven for criminals and terrorists.
In an interview at the World Economic Forum in Davos, Switzerland, Lew told "Squawk Box" he has spoken to JPMorgan Chairman and CEO Jamie Dimon about bitcoin, and the two share a certain "incredulity" about it.
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"From the government's perspective, we have to make sure [bitcoin] does not become avenue to funding illegal activities or to funding activities that have malign purposes like terrorist activities," Lew said.
"It is an anonymous form of transaction. And it offers places for people to hide."
(Read more: Treasury launches new security—first in 17 years)
In a separate interview, Dimon told CNBC Wednesday that JPMorgan would be unlikely to have much to do with bitcoin.
"The question isn't whether we accept it. The question is do we even participate [with] people who facilitate bitcoin?" he said. "The people who are going to eventually really get upset with it will be governments."
Bitcoin will eventually be made to follow the same standards as all other payment systems, Dimon predicted. "That will probably be the end of them."
Lew said the government has made it clear through enforcement actions that it will look at bitcoin and similar transactions and will "enforce all the rules on illegal money activity."
On the issue of the nation's borrowing authority, Lew told CNBC that Congress needs to raise the debt ceiling as soon as possible and not wait until the last minute.
The U.S. economy is doing pretty well, and lawmakers should avoid another self-inflicted wound to growth, he said.
In a letter to congressional leaders, Lew warned the government would likely run out of borrowing authority by late next month, if lawmakers do not act swiftly to raise the federal debt ceiling.
The Treasury can use so-called "extraordinary measures" to forestall default, but those measures do not include delaying refund checks to American taxpayers, he said.
Congress passed a two-year budget deal in December, but did nothing to address the need to increase the debt limit.
Heated debates in Washington over the borrowing ceiling roiled financial markets in 2011, when the risk of default prompted Standard & Poor's to downgrade America's debt rating.
Political dysfunction rattled Wall Street again during October's government shutdown.
On Iran, Lew said sanctions have worked and gotten the country's attention concerning its nuclear ambitions. But he added there's no "open for business" signup in Iran yet.