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.