Is the Obama Administration going after Bitcoin?

Is the Obama Administration going after Bitcoin?

Bitcoin-coin2

 

Evidently Janet Napolitano has decided that she can no longer allow the unregulated currency Bitcoin to conduct business as usual. The DHS has served the Dwolla mobile payment service with a court order forcing it to cease all activities with the Mt. Gox bitcoin exchange. Dwolla is an online service that allows for money to be transferred for a small fee. This is the first government attack on companies involved in bitcoin exchanges and many fear that it is the opening salvo in a larger attack. According to Pandodaily reporter Adam Penenberg in an article written shortly before the DHS actions were known:

“It’s conceivable the government will try to either regulate or destroy it if it becomes widely adopted. With more than $1 billion worth of Bitcoins in circulation that could happen any time now. In the past the government has aggressively fought back threats to the U.S. dollar’s preeminence. There’s the lesson of Bernard von Nothaus, a “monetary architect” who created his own currency based on precious metals called the “Liberty Dollar.” After von Mothaus managed to inject some $60 million of his homemade currency into circulation, a government prosecutor accused him of “domestic terrorism” for attempting to undermine the government. Unlike with Liberty Dollars and Wikileaks, there’s no single person identified with the movement.”

According to Ars Technica who was able to obtain a copy of the warrant, the DHS is going after Mt. Gox for operating an “unlicensed money transmitting business.”

As part of the account opening process, Wells Fargo required Karpeles and Mutum Sigillum LLC to complete a "Money Services Business (MSB) Accounts, Identification of an MSB Customer" form. That document was completed on May 20, 2011 and identified Mutum Sigillum LLC as a business not engaged in money services. The application asks several questions; to include, "Do you deal in or exchange currency for your customer?" and "Does your business accept funds from customers and send the funds based on customers’ instructions (Money Transmitter)?" Karpeles answered these questions "no," indicating that Mutum Sigillum LLC does not deal in or exchange money, and that it does not send funds based on customer instructions.

Money transmitting businesses are required by 31 USC section 5330 to register as such with FinCEN. According to FinCEN records on May 6, 2013, neither Mt. Gox nor the subsidiary, Mutum Sigillum LLC, is registered as a Money Service Business.

Mt. Gox acts as a digital currency exchange where customers open accounts and fund the respective accounts with fiat currency, which is then exchanged into crypto-currency by Mt. Gox; the crypto-currency is known as bitcoin. Fiat currency simply refers to any money that a government has declared to be legal tender. The exchange is bidirectional and allows customers to also exchange bitcoins back into fiat currency, and then withdraw those funds. The exchange of fiat currency and bitcoins incurs a floating rate fee charged by Mt. Gox and is determined by the customer’s aggregate amount of funds exchanged on a monthly basis.

If DHS closes down Mt. Gox, it will deal a crippling blow to the Bitcoin currency. According to the Mt. Gox website, as of July 2011 the exchange handled over 80% of all Bitcoin trades. Until recently the currency had little value but as confidence in the Euro and the USD has fallen the value of a Bitcoin has risen to over $100. As with everything, the government can’t allow anything of value to exist without getting their hands on a piece of the action. While Bitcoins are used at times to purchase illegal items such as drugs, so are Dollars. According to CNN, 90 percent of all U.S bills contain small traces of cocaine from its use in transaction with the drug cartels and other dealers.

 

Source: http://betabeat.com/2013/05/warrant-reveals-department-of-homeland-security-seized-mt-goxs-dwolla-account-for-unlicensed-money-transmitting/

https://mtgox.com/

http://investmentwatchblog.com/financial-privacy-under-fire-dhs-freezes-bitcoin-money-transfers/

http://cdn.arstechnica.net/wp-content/uploads/2013/05/Mt-Gox-Dwolla-Warrant-5-14-13.pdf

http://arstechnica.com/tech-policy/2013/05/feds-reveal-the-search-warrant-that-seized-mt-gox-account/

 

Image credit: Casascius

About Suddenly John

John is an educator and a news enthusiast, as well as co-owner of Tavern Keepers. He was formerly an intern with Mercury One, doing daily research for The Glenn Beck Show as well as other products of TheBlaze. He now writes for Tavern Keepers, Right Side News, and Examiner.com. He is also preparing to pursue a doctorate in Instructional Technology and works with online software companies to develop instructional aids.