The Winklevoss twins have called for a sheriff to police the "wild, wild west" of virtual currencies after the founder of a company they backed was charged with money laundering offences.
Tyler Winklevoss called the arrest of Charlie Shrem a "speed bump" in the development of bitcoin, while his brother Cameron said their investment had been made at a time when anti-money laundering rules had not been clear for virtual currency companies.
(Read more: Bitcoin 'theInternet of money': Winklevoss twins)
"No one would deny it was the wild, wild west," Cameron said. "The wild west attracts cowboys, and I don't think anybody here would deny a sheriff would be a good thing."
The twins were speaking at a hearing held by the New York department for financial services, which is considering issuing "bit licences" to regulate companies that trade virtual currencies.
The pair are still more than $70m up on their investment in bitcoin, but their reputations and fortunes are tied ever more closely to its fate.
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They have not sold any of their holdings of the currency itself and are trying to launch an exchange-traded fund that will track the Bitcoin price, into which they might sell some of their holdings over time. The Securities and Exchange Commission, which is reviewing their application, has shown a cautious approach to ETF innovation in the past.
The arrest of Bitinstant's Mr Shrem has also clouded the prospects for Winklevoss Capital receiving anything back on their investment in the company. They led a $1.5m funding round in the autumn of 2012.
Mr Shrem claimed, in a background report cited at a bail hearing on Monday, that Bitinstant had been trying to raise money to continue operations, but the business shut down last summer when it became clear it needed to do more to comply with existing regulation. The website has been taken down completely in recent weeks.
By backing Mr Shrem, the colorful 24-year-old face of bitcoin in New York, its most vibrant entrepreneurial community, the twins have raised questions over their due diligence and judgment, just as they try to establish Winklevoss Capital as a player on the city's angel investment scene.
When the brothers became interested in bitcoin in 2012 and decided to start buying the currency, Cameron additionally pushed to back some of the emerging bitcoin companies. Bitinstant was then one of the most high profile in the market for exchanging dollars for bitcoin.
(Read more: The Winklevosses:Bitcoin worth 100 times more)
It emerged at the hearing that the twins have continued to evaluate further investments, including in a bitcoin ATM business.
The twins began buying bitcoin months before it became an international talking point, when a single coin could still be purchased for less than $10. By last April, when they went public with their holdings, the currency was trading at $120 and their stash was worth $11m. On the MTGox exchange, the price for one bitcoin on Tuesday was $944.