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The End of Bitcoin as We Know It

[Reading Time: 7 minutes]

(Or as hard-core Bitcoiners want it, I should say.)

“U.S. crypto-preneurs who don’t factor in regulation could under-budget their ventures by, at a minimum, a quarter of a million dollars annually.”

Rocky week for the crypto-currency world this past one!  All of the following happened over the course of the last seven to ten days:

  • Liberty Reserve (LR) was shut down, and its management indicted and arrested, in what is being described as “the largest money laundering case in U.S. history.”  A short video at the bottom explains how the case went down.
  • FinCEN designated LR as entity “of primary money laundering concern,” and proposed a rule to order that all large financial institutions freeze any and all of LR’s assets. Continue reading

Dwolla Account Seizure Reveals Mt Gox on Brink of US Indictment

[Reading Time: 8 minutes]

The US District of Maryland seizure warrant that stopped Dwolla in its tracks this week reveals in good detail that the Department of Homeland Security, the US federal agency charged with not only protecting the US borders but also deterring cybercrime, has been investigating Mt Gox for a while now, and has found a criminal violation to the US federal prohibition to operate an unlicensed money transmission business.

This warrant, which was published yesterday by multiple blogs, officially confirms that the FinCEN guidance of March 18, in which this federal government agency equates virtual currency exchanges and administrators to money transmitters, is already being enforced.  To my knowledge, no charges have been made at this point, but the fact that two bank accounts were seized (see below) seems to indicate that an indictment may be imminent.

What exactly is the “Dwolla Account” seizure warrant that stopped its operations this week?  Why was it issued?  What’s going on here!? Continue reading

The Criminal Precedent that Could Curb Bitcoin’s Enthusiasm

[Reading Time: 10 minutes]

In July of 2008, after months of wrangling with the Department of Justice (DOJ), E-Gold, Ltd.’s senior management and directors pleaded guilty to the following charges:

  • Conspiracy to Launder Monetary Instruments (federal)
  • Conspiracy to Commit an Offense Against the United States (federal)
  • Operating of Unlicensed Money Transmitting Business (federal)
  • Transmitting Money Without a License (District of Columbia)

What does E-Gold have to do with Bitcoin?

Well, as soon as I describe what E-Gold was and did, you’ll see that the parallels with Bitcoin and its crypto-brethren are remarkably similar.  I will be quoting from the indictment itself, underlining Bitcoin-relevant language, and adding comments in brackets:

  1. E-Gold was an issuer of “digital currency,” defined as a medium of exchange offered over the Internet Continue reading
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