United States of America v. Bitcoin: Crypto-Currency Prosecution Update
The United States has begun their attack on crypto currencies, and it is no surprise.
If you understand the Federal Reserve, or banking system at all, you know why governments depend on inflating their currencies to pay off debts they create. If you would like to learn the basics of this system, watch our online webinar, which undeniably proves this relationship.
Crypto-currencies, like Bitcoin, offer a way for the citizenry to opt out of government-created inflation. So, of course governments will not like everyone using Bitcoin. It takes away their ability to steal wealth through inflation. However, the more they fight against Bitcoin, the more the government stands to wake up the masses, and the more mainstream Bitcoin will become.
Government regulation and prosecution is also one of the factors which may effect Bitcoin’s price or adoption curve. But, as usual, the government is sprinting to catch up with technology, which is common to most areas of law: slow to adapt.
Because governments will likely see Bitcoin (or other crypto-currencies) as a threat, it is safe to say they will demonize it, and use words like “drug-dealer,” “terrorists” or other charged language in an attempt to garner popular support against it. At least, this was my prediction six months ago, when I was writing my book: Bitcoin Revolution: Ending Tyranny For Fun and Profit.
So, lets take a brief look at whats happened since then:
March 18, 2013: [“It’s not really currency, but we still want to know about it.”]
US Treasury’s Financial Crimes Enforcement Network published a report on guidelines about how to treat “virtual currencies” like Bitcoin. You can read the full report here. http://fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html?utm_source=dlvr.it&utm_medium=twitter. Basically, the US just said that money-laundering and record-keeping laws apply to people who “create” and “exchange” virtual currencies like Bitcoin. Showing that they may not completely understand the Crypto-Currency, the “creator” of Bitcoin is unknown, and Bitcoins merely come into existence by mining activity. So those who “create” Bitcoins… I guess that is up for debate.
April 25, 2013: [“We shut down your bank accounts and won’t tell you why.”]
At least two Canadian Bitcoin exchanges reported that their businesses have been disabled because Canadian banks simply shut down their accounts without citing any valid sources or authority.
May 14, 2013: [Homeland Secuirty Shuts Down Dwolla Account For Account Owner’s Failure To Tick a Box. Sounds Fair. <Insert Sarcasm>.]
US Department of Homeland Security froze bank accounts of a Dwolla and Mt. Gox user. Dwolla is an American-based medium to move money, and Mt. Gox is a Bitcoin exchange. The account owner allegedly failed to check a box in his bank account application which indicated that he would be transmitting money. He then, according to an agent's affidavit, moved US dollars to Bitcoin and back. His account was seized based on an agent's affidavit. You can read that affidavit here. These types of pre-trial seizures are a common way for the US government to destroy a business or individual without the required level of a finding of guilt “beyond a reasonable doubt” at trial, which law mandates. News on the prosecution has been light since the pre-trial seizure. However, the official court documents, which were recently (May 29, 2013) made public, reveal the reason for the entire seizure, and subsequent prosecution was because the account owner forgot to tick the right box two years ago when he opened his bank account. There will be more news on this story, I’m sure…
May 29, 2013: [Feds Save World From Online Drug Dealers Using Unconstitutional Patriot Act.]
US Feds shut down Costa-Rican based “Liberty Reserve,” another crypt-currency citing the “Patriot Act” for support. The complaint issued by the prosecutors basically said that Liberty Reserve targeted mostly illegal activities (drug dealing, money laundering, computer hacking, etc.) Five individuals have been arrested, including Liberty Reserve’s CEO, who had renounced his US Citizenship in 2011. Why did they go after Liberty Reserve and not Bitcoin? Liberty Reserve was centralized: it had a CEO, servers, and domains. Bitcoin does not.
Recently, Canada has indicated that it will not treat Bitcoin as “funds,” therefore, it will not be regulated, and subject to anti-money laundering laws.
So that is a quick update on what governments are doing to regulate, prosecute, and destroy crytpo-currencies.
But here is the interesting thing, since the long overdue bubble pop, of April 10, the price of Bitcoin has steadily increased despite these attacks from government. It will be interesting to see if the government finally does manage to hurt Bitcoins growth.
Stay tuned, because it is our belief there will be more villianization of Bitcoin users to come… and more price increases of Bitcoin.
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