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Fed Crackdown On Bitcoin To Protect Monopoly On Economic Power

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Unread 05.20.13, 09:05 AM
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Fed Crackdown On Bitcoin To Protect Monopoly On Economic Power

05.19.13 09:01 PM

When governments center a great portion of their focus around controlling and manipulating economic affairs, they become very nervous at the utterance of the words “alternative currency.” And in the case of Bitcoin, in seems that U.S. officials have heard enough about the currency alternative to become worried that its growing popularity might affect the government’s economically enabled monopoly on power.

Bitcoin has been getting flogged by politicians who have little interest in understanding how the alternative currency works, who uses it and why those tired of government manipulated currency may opt to use it for certain transactions.

Two years ago, when online currency first started to get a little media attention outside of tight-knit Internet cliques, Senator Charles Schumer (D-N.Y.) breathlessly exclaimed at a news conference: “Literally, it allows buyers and users to sell illegal drugs online, including heroin, cocaine, and meth, and users do sell by hiding their identities through a program that makes them virtually untraceable. It’s a certifiable one-stop shop for illegal drugs that represents the most brazen attempt to peddle drugs online that we have ever seen. It’s more brazen than anything else by light-years.”

Of course, Bitcoin is not — as Schumer seemed to be convinced — an online currency specifically designed for the buying and selling of illicit drugs. And since his hissy fit, the virtual currency has become more popular as online companies and even some brick-and-mortar small businesses throughout the Nation have begun accepting Bitcoins.

Even though Bitcoin is proving a viable vehicle for legitimate financial business, the Federal government has doubled down on attempts to highlight the fact that it can be used for illicit means. (Of course, drug dealers, prostitutes, terrorists and mobsters haven’t stopped accepting cash, have they?)

Last week, the Feds initiated actions that prompted the online payment service Dwolla to stop processing Bitcoin transactions. The Des Moines, Iowa-based startup had raised $16.5 million in funding two weeks ago to further initiatives to mainstream Bitcoins. It blamed the decision to stop processing transactions involving the currency on “recent court orders” crippling its ability to send money through MtGox, the largest Bitcoin exchange.

MtGox issued the following statement:
Statement Regarding Dwolla:

Like many who have contacted us, MtGox has read on the Internet that the United States Department of Homeland Security had a court order and/or warrant issued from the United States District Court in Maryland which it served upon the Dwolla mobile payment service with respect to accounts used for trading with MtGox. We take this information seriously. However, as of this time we have not been provided with a copy of the court order and/or warrant, and do not know its scope and/or the reasons for its issuance. MtGox is investigating and will provide further reports when additional information becomes known.

A Department of Homeland Security seizure warrant to Dwolla for the MtGox’s account with the online processing company says that Dwolla, a Japanese startup, failed to register in the United States as a money-transmitting company. That matters, because supposed “anti-terror” financial rules from recent years require online transfer systems to identify users. Dwolla president and CEO Mark Karpeles now faces up to five years in prison.

“The shutdown of MtGox is a little bit worrying, it looks as if the US government wants to put a stranglehold on the kind of business that’s popping up around Bitcoin, but, crucially, it doesn’t affect much the currency itself.” Arwa Mahdawi, a consultant, journalist and Bitcoin employee, told RT. “It’s just the exchanges around it and the U.S. exchanges. And by the nature of it, Bitcoin being an international currency, shutting down an exchange like MtGox, even if it affects the liquidity of Bitcoin, can’t kill Bitcoin.”

Many people watching the Federal case against Bitcoin surmise that the government is simply grasping at straws to make it as difficult as possible for virtual currencies to gain more mainstream acceptance, because the proliferation of a de-centralized, apolitical currency network presents a massive threat to the lucrative symbiotic relationship between government and traditional “private” banks.

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