US: BitCoin Crackdown

Via The Washington Post:

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Sen. Chuck Schumer (D-N.Y.) described Bitcoin as an “online form of money laundering” and called for the authorities to shutter the Bitcoin-based drug market Silk Road. Yet until recently, the feds have taken a relatively hands-off posture.

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That hands-off stance may have started to change this week when the feds took action against Mt. Gox, the world’s leading Bitcoin exchange. Many people use Dwolla, a PayPal-like payment network, to send dollars to their Mt. Gox accounts. They then use those dollars to buy Bitcoins. On Tuesday, Dwolla announced that it had frozen Mt. Gox’s account at the request of federal investigators. It’s the first federal action against the currency.

CNet has confirmed that the asset seizure was initiated by Homeland Security Investigations, a division of Immigration and Customs Enforcement. Among other things, that agency has the power to enforce laws against money laundering and drug smuggling.

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Jerry Brito, a scholar at the libertarian Mercatus Center at George Mason University, urges federal regulators to tread lightly. “Bitcoin has the potential to be a boon to the economy and a boon to merchants,” he argues.

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Moreover, he says, “You can’t put the genie back into the bottle.” In his view, the federal government would have as much difficulty shutting down the Bitcoin network as major content companies have had shutting down peer-to-peer file sharing. A major crackdown would merely drive the network underground, where it would continue to be used for illicit transactions but would be off-limit to ordinary consumers.

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“I hate to say it, but the Bitcoin community needs to start lobbying,” he says. “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.”