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U.S. Government Siezes Bitcoin’s Bank Account.

Written by Gary North on May 16, 2013

Bitcoin has been promoted as digital money, an alternative to fiat money. The company’s owner’s will now get to test their theory. Their fiat money just got frozen by the federal government. The Feds seized Bitcoin’s bank account.

Everyone with any understanding of the U.S. government knew that something like this would happen. Maybe the owners planned for this. Maybe the fiat money in their account is like the $20 bill that people put in their upper drawer in the bedroom dresser: “easy money” for burglars, who will take the money and run. But one thing is for sure: the owners look silly.

If you are going to create an alternative currency, (1) have your citizenship in the Bahamas, (2) have your bank account in the Cayman Islands, (3) have your company set up on the Isle of Man, (4) register your domain name in Russia, and (5) have your site’s servers in the Netherlands.

The owners have Bitcoins in digital accounts. They announced this from the start. Maybe they can pay their lawyers with bitcoins. We will see. So will they.

Senator Chuck Schumer jumped in. He accused the company on online money laundering. He called on the government to shut them down.

People who bought bitcoins had made a lot of money this year. One Bitcoin was worth $13.50 at the start of the year. It soared to $110. It was worth pennies a couple of years ago.

If it stays at $110, that will be a good sign that the project is working.

Federal law requires organizations that provide money transmission services to register with the Treasury Department’s Financial Crimes Enforcement Network. In March, FinCEN issued guidance classifying Bitcoin exchanges as money transmitters. But according to a warrant sought by ICE and approved Tuesday, Mr. Gox had failed to register as the law requires, subjecting its funds to forfeiture.

The Bitcoin system is digital and decentralized. The Feds cannot trace the flow of funds. But they surely can confiscate digital dollars.

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38 thoughts on “U.S. Government Siezes Bitcoin’s Bank Account.

  1. Why anyone would pay anything for imaginary money is beyond me.

    • Simon Jester says:

      Really? You do it every day…

    • CrustyOldGeezer says:

      Never heard of "federal reserve notes"?

      Maybe "Credit card"?

    • kodster says:

      Basically, it's called "bartering". You agree to terms with the seller, and exchange agreeable items… in this case, bitcoins. This was set up as a network of people wanting to barter with each other.

      • J.......M..... says:

        No, it is not bartering. Bartering requires two mediums of wealth used to exchange. If any one side of the exchange is NOT TANGIBLE, (i.e. a promise to be used for future exchange for wealth), then it is not bartering. In bartering, the two mediums of wealth exchange and that is the fulfillment of the barter agreement. With a non-wealth medium of exchange being offered by one party, the other side of the agreement has to accept a promisary note for future fulfillment payment for the exchange. All "money" is in itself inflation. It is imaginary. Gold and silver are commodities. Bearer certificates USED to be proxies for gold and silver (or other commodities) as payment. All currencies, including Bitcoin, are fiat (i.e. imaginary demand) with no more value than the paper that the "numbers" are written on.

        • Bellagio says:

          BS! And In what context is your narrow definition?… just commodities trading on the exchange floor.

          Bartering is simply… to exchange, haggle(horse trade), swap, trade. There no such lexicon that limits its use ONLY to the realm of banking, intrinsic negotiation, the NYSE, CBOT, or any financial exchange market/floors.

          So in your world to barter my pride & trust away for 6 pieces of silver is improper use of the word "barter" since my pride is not a medium of wealth or has intrinsic value?

          Geeezzz… you're hit'n the crack pipe a bit too hard, is what I think.

    • Rawhide071 says:

      US Currency is imaginary. So is the Euro… We're all paying for it now (So are you).

    • Really? What do you think that VISA and MasterCard are? Gold and silver coins? It's a blip in a computer, backed by paper printed on cotton.

    • WhiteFalcon says:

      Hell, our money IS imaginary.

  2. Typical Gov. reaction. If they can't regulate ,tax, or control something ……shut it down.
    (e.g anyone remember the kids' lemonade stands.)

  3. There is no "Bitcoin company". It is an open-source project with many participants and involved companies.

    What happened is that the leading currency exchange for Bitcoins, MtGox.com, apparently had their bank account frozen for failing to comply with the FinCEN guidelines regarding trading in virtual currencies.

    There are a number of other Bitcoin Currency exchanges still operating, as well as many other bitcoin-oriented business, that are operating unaffected by this action..

    The principle of Bitcoin is that there is no centralized source that can be attacked to shut it down, and in this regard the technology is proving itself successful. It is designed to be a naturally deflationary currency free from government manipulation (such as just printing more money when wanted).

    Bitcoin is typically appreciated by those technically inclined (so far) and those who prefer a non-fiat currency, similar to a gold standard. In Bitcoin's case, the "currency" is computing power used to generate the currency itself through cryptographic methods.

    Check out http://www.bitcoin.org for more information if you're interested.

    • Robert Evans says:

      "What happened is that the leading currency exchange for Bitcoins, MtGox.com, apparently had their bank account frozen for failing to comply with the FinCEN guidelines regarding trading in virtual currencies."

      More specifically, they had their US bank account frozen. MtGox is an international company based in Japan.

  4. ncbill12 says:

    Bitcoin is the ultimate fiat currency.

    Remember there have already been plenty of losses to theft for bitcoin 'investors'.

    Bitcoin is a black box – the algorithm could be spawning one bitcoin for its creator for every bitcoin your computer 'mines' and you'd never know anything about it.

    • It is open source and reviewed so it is not a black box. Please do not talk about something you do not understand. It cannot be printed at will and there is a theoretical upper limit. Therefore it is not the “ultimate fiat” currency. No 100 trillion dollar zimbabwe notes here. Theft/loss is indeed an issue, but that is a problem for all currencies including gold.

      • Please do not talk about something you do not understand.

        Please take your own advice. You have ONLY the word of the ANONYMOUS creators that there is a upper limit or that it can't be created outside of the 'mining' process. If it were TRULY open source, it would have ZERO security against being 'printed' at will. In addition, since NO BitCoins physically exist, the ENTIRE currency can literally be deleted.

        • day2knight says:

          Because it is open source it has the best security possible. No one can change the code without someone else noticing. Plus, if one exchange changes its algorithm the other exchanges will notice immediately.

          The upper limit is not just on the word of anonymous creators. There is an upper bound inherent in the algorithm used. It's math.

        • Robert Evans. says:

          "Please take your own advice. You have ONLY the word of the ANONYMOUS creators that there is a upper limit or that it can't be created outside of the 'mining' process."

          Anyone. Can. Read. The. Source. Code.

          If a would-be counterfeiter tries to modify the Bitcoin software to create Bitcoins in excess of what others using the standard software allow, the counterfeiter's fake coins will be rejected by the network. No one running the standard software will accept them.

  5. Fear, Uncertainty, and Doubt are the sole currency dealt by the State. This is how they maintain control of the sheeple. By tarnishing Bitcoin, they remove competition for the federal reserve notes, prolonging that farce just a while longer.

  6. yep, start competing against the international banksters and they will stop at nothing to shut you down.

    • Yep.. Just ask Iran What happens when you say no to the bankers Federal Reserve Petro Dollar Legal Tender Notes. I would tell you to also check with Saddam and Qaddafi, Nut you know how that worked out for them.

  7. Worthless Wannabee says:

    I think maybe one or two of the ten comments posted so far know what is REALLY going on and at the same time understand Bitcoin. Bitcoin does not have "a bank account". Therefore, the headline is a lie and is bound to create FUD which may mean that Mr. North is ignorant about Bitcoin. It does not really matter. The big bad government is picking on Mr. Gox and we will see who wins in the end. Mr. Gox may be compared to Mr. Nothaus (I think I spelled his name right) He is the "monetary architect" that created the Liberty Dollar. Regardless, go and try to figure out the TRUTH because the TRUTH is being dragged in the dirt.

    • Mt Gox is the biggest exchange therefore likely has the biggest bank account. The bank acccount is denominated in dollars not in bitcoins. What don’t you understand?

    • Rattlerjake says:

      Bernard von NotHaus

  8. Mt. Gox was already slow, due to the fact that most of the money sent to and from them had to go through so many intermediaries. Often, the turnaround time was measured in weeks if not months (yes, of course if you're a savvy user and had everything prepared in advance, you could beat those times, but if you were starting from scratch, my point stands). Not to toot my own horn, but I run a Canadian Bitcoin Exchange (www.bcbitcoins.com) and I make most of my money by catering to customers who prefer a turnaround measured in hours rather than weeks… and in fairness to my competitors, I'm very far from the only Canadian Exchange.

    Government regulations which claim to "deal" with Bitcoin are completely impossible to comply with anyway. Mt. Gox COULNDN'T register, not because they were unwilling to give certain information, not even because they didn't HAVE certain information, but because the information the government demands DOESN'T EXIST with Bitcoins. "Customer's Account number?" (sorry, doesn't have one); "Customer's financial institution?" (Whodat?) "Issuing Country of Currency?" (sorry, doesn't exist)… and so on, and so on, ad nauseam.

    Right here in Vancouver, BC, there are MANY people who will come TO YOUR DOOR and trade for bitcoins, both ways, WITH CASH… no bank involved at all.

    How's the government ever going to stop something like that? Arrest everybody with a smart phone? A computer?

    The only way the government could ever completely stop bitcoin would be to shut down the entire internet… and I think people would tend to notice something like that!

    …and just a reply to several comments, especially "Bitcoin is the ultimate fiat currency." With all due respect, you're missing the point: "fiat" implies authority and control. Bitcoin is VOLUNTARY. Satoshi (Bitcoin's anonymous creator) do NOT say "I have issued this digital currency, and I require you to use it." Instead, he said "Here, I've created a digital currency which bypasses all the banks. If you think it's as neat and cool as I do, feel free to use it." There's a big difference between the two statements, both philosophically and practically.

    I grant that somebody as bright as Satoshi COULD have written the program to give himself a healthy chunk of virtual coins… but the point is that he couldn't SPEND them on the bitcoin network. Bitcoins must be visible in the public blockchain, or they will not be recognized by the network.

    I will also grant that some sneaky twelve-year-old somewhere is almost certain to crack the bitcoin network at some point in the future… but if you think the EXISTING international banking network is safe from such twelve-year-olds, you're living in a dreamworld.

  9. How the hell do you seize something that doesn’t actually exist???

    • The same way they can demand taxes on income/sales/properties/interest/etc. that don't exist. They've done it to me, they can do it to you.

  10. bs7sden says:

    Chuckie 'Sleazeball' Screwmer, – always around when something is being destroyed?

  11. Robert Evans says:

    As numerous others have mentioned, "Bitcoin" has no bank account – its users have bank accounts, and one of its users engaged in the business of swapping Bitcoin for dollars had his bank account frozen.

    This article is wrong on so many levels, I'm going to rewrite it:

    U.S. Government Seizes Bitcoin Exchange Bank Account

    Bitcoin has been promoted as digital money, an alternative to fiat money. The largest Bitcoins-to-dollars exchange will now get to test their theory. Their fiat money held in the United States just got frozen by the federal government. The Feds seized MtGox’s US bank account.

    Everyone with any understanding of the U.S. government knew that something like this would happen. Maybe the owners planned for this. Maybe the fiat money in their account is like the $20 bill that people put in their upper drawer in the bedroom dresser: “easy money” for burglars, who will take the money and run. But one thing is for sure: the owners look silly.

    If you are going to run a virtual currency exchange, (1) have your citizenship in the Bahamas, (2) have your bank account in the Cayman Islands, (3) have your company set up on the Isle of Man, (4) register your domain name in Russia, and (5) have your site’s servers in the Netherlands. But even if you do this, if you want to do business with US citizens you still have to have some kind of connection to the mainstream United States banking system – and whatever this connection is will be targeted by the government.

    The owners have their US dollars in digital accounts. They announced this from the start. Maybe they can pay their lawyers with bitcoins – that is, if they want to continue doing business in the United States. We will see. So will they.

    Senator Chuck Schumer jumped in. He accused the company on online money laundering. He called on the government to shut them down.

    People who bought bitcoins had made a lot of money this year. One Bitcoin was worth $13.50 at the start of the year. It soared to $110. It was worth pennies a couple of years ago.

    If it stays at $110, that will be a good sign that the project is working.

    Federal law requires organizations that provide money transmission services to register with the Treasury Department’s Financial Crimes Enforcement Network. In March, FinCEN issued guidance classifying Bitcoin exchanges as money transmitters. But according to a warrant sought by ICE and approved Tuesday, Mr. Gox had failed to register as the law requires, subjecting its funds to forfeiture.

    The Bitcoin system is digital and decentralized. The Feds cannot trace the flow of Bitcoins. But they surely can confiscate digital dollars, especially if they are in a large centralized exchange.

  12. Government will never give up control of currency. If government can't control the currency, they can't borrow against it, print it or manipulate it to acquire and retain power.

  13. Desi Erasmus says:

    This report indeed illuminates the ignorance of the author. This is odd because so much technical detail about the Bitcoin value exchange scheme exists in so many places. Based on past experience, I would have expected him to do a better job of doing his homework before he shoots of his mouth. Perhaps his ideological blindness and confirmation bias are showing.

    To summarize, there IS NO "Bitcoin company" that governs this exchange system (though there are many companies like Mt. Gox providing services to users of the exchange). That is one of the main features of the system that has attracted users. I suspect Mt Gox was anticipating this day, and that the larcenous Senator Schumer and his confiscators will be disappointed by the limited effect of their supposedly decisive move.

  14. I think the part on how to set up adigital currency was spot on! Some business men will learn from these mistake and make a better product,so in the long run this is good!

  15. This is competition to the big banks digital currency – VISA, MasterCard, etc. ALL of those 'currencies' are digital now. So PLEASE don't tell me that BitCoin is 'imaginary currency'. Paper money imaginary currency, and now the blips that the major banks use are nothing more than ones and zeros on a computer screen. It's exactly the same as BitCoin, but controlled by GOVERNMENT.

  16. If they go after bitcoin, when are they going to go after the airlines frequent flyer miles program?
    After all, airline miles can be traded on open market, can be used to purchase items other than airline tickets, Or be sold and traded for cash and other valuable items…

  17. Gary North never knows what he’s talking about anymore. Ignorant, sensationalized headlines is all he know how to do.

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