Biggest Bitcoin Account Frozen By The United States Government

7

Want more government in your pocket? Wednesday, the US federal government froze the largest Bitcoin exchange.

The Department of Homeland Security seized an intermediary account which tied Dwolla to Mt. Gox, which hosts 80% of all Bitcoin trades. The problem? Mt. Gox was an “unlicensed money service.” The exchange was based in Japan.

Why did this happen? According to Gawker, Mt. Gox’s chief executive, Mark Karpeles, “failed to declare he was operating a money transmitting business when he opened an account with WellsFargo in May 2011, according to a warrant made public on Wednesday.” The US Treasury Department ruled in March that any entity exchanging online currency, such as Bitcoin (which is not backed by a centralized bank), would be suspect for money-laundering. This lead to the Treasury requiring reports of any transaction worth more than 10,000 US Dollars. According to the Wall Street Journal, “The Commodity Futures Trading Commission also is considering whether to regulate so-called virtual currencies.”

Because of this, the US authorities charged Mt. Gox with failing to register their business with the Treasury’s Financial Crimes Enforcement Network. This entirely undoes why people love Bitcoin; the Internet-based currency has no central governmental planner. The government argues that registration aids in combating terrorism and helps the War on Drugs.

A Bitcoin exchange could likely never reach the requirements needed to be a “legitimate” currency exchange. Most notably, licensed Internet exchanges require their users to be able to identify all parties involved in the transaction. Bitcoin, however, is specifically designed to be anonymous. The transaction may never be able to be traced. Thus, “it’s not all that easy to see how a Bitcoin exchange can ever become so licensed.” In other words, the current system would not allow Bitcoin to operate successfully unless it radically changed its design.

Seems to me like the US government is having a power trip on this one; after all, Bitcoin is a great way to illegally evade taxes and deal drugs. Jerry Brito from the Mercatus Center notes why the government thankfully won’t win this one. He says,

Bitcoin has the potential to be a boon to the economy and a boon to merchants… You can’t put the genie back into the bottle… I hate to say it, but the Bitcoin community needs to start lobbying. It needs to start educating policymakers, lobbyists and influencers about the pros of Bitcoin and the impossibility or the difficulty in getting rid of all the bad uses.”

Looks like the Bitcoin war has finally begun. Let the Internet militias assemble.

Tags

About the author

Rachel Burger

Twitter Website

Rachel Burger is a political commentator based out of the nation’s capital. Rachel’s articles and opinions have appeared in Forbes, TownHall, PJ Media, The Libertarian Republic, Red State, and a plethora of other outlets both online and in print. She is also a regular columnist at Communities Daily News. Currently, Rachel works in the private sector as an analyst. Rachel graduated with an MA from University of Chicago’s Committee on International Relations and with a BA from Agnes Scott College.

  • http://twitter.com/trampas trampas

    >This entirely undoes why people love Bitcoin; the Internet-based currency has no central governmental planner. The government argues that registration aids in combating terrorism and helps the War on Drugs.

    No it doesn’t! MtGox is just one market. Propaganda and shit journalism.

    • JohnShroff

      Could’ve been a bit more constructive with your criticism.

  • http://www.facebook.com/ian.unruh Ian Unruh

    This article is incredibly misleading. The exchange did not get frozen, its exchange account for Dwolla-based transactions was frozen. You can still wire money to its Japanese bank account or use other transfer services it provides.

  • http://www.facebook.com/Lionhart40 Leon Hall

    Anything that lacks government control strikes fear into the establishment.

  • JohnShroff

    I dont see any reason for lobbying or educating lawmakers. Let the government try to regulate it all they want, they’ll only be spinning their wheels. Like that quote said, “its impossible to put the genie back into the bottle”

    • mijj

      > I dont see any reason for lobbying or educating lawmakers.

      agree 100%.

      Bitcoin is above and beyond the nationalistic fiat parasite system used to steal wealth from those who create it. Subsuming Bitcoin into that system will the undoing of Bitcoin.

  • http://www.facebook.com/people/Scott-McMahon/100000161076848 Scott McMahon

    They’re so concerned about Bitcoin being used to launder drugs money and terrorist funds, and yet, HSBC is still allowed to have a banking license…. Hypocrisy much…? The Central banks are scared of the competition, that’s what it boils down to…