Fed Crackdown On Bitcoin To Protect Monopoly On Economic Power

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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.

Personal Liberty

Sam Rolley

Sam Rolley began a career in journalism working for a small town newspaper while seeking a B.A. in English. After covering community news and politics, Rolley took a position at Personal Liberty Media Group where could better hone his focus on his true passions: national politics and liberty issues. In his daily columns and reports, Rolley works to help readers understand which lies are perpetuated by the mainstream media and to stay on top of issues ignored by more conventional media outlets.

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  • Mark Read Pickens

    I’ll believe governments can suppress bitcoins when I see a man eat his own head.

    Mark Read Pickens

  • jdn

    The only thing that gets politicians this riled up is a lack of taxes . Soon as they can figure out how to get their share of the action on bitcoins all will be OK . Everything must be taxed .

    • Wizzardly

      Sounds like the Mafia.

  • buck

    Schumer. How do people like him get elected? And continue to get re-elected?

    • Clint McInnes

      Easy. He’s part of the political machine that counts the ballots. It doesn’t make any difference how a given borough actually votes. What matters is who does the counting. And I think you can probably guess how THAT works.

      • JimH

        Hi Clint, Living near Chicago, I don’t need to guess how that works.
        Our Governor wasn’t elected by the eligible or living voters.
        The Chicago cemetery took him over the top.
        The state AG won’t investigate because I’m sure some of the cemetery votes for her too.

  • JimboToronto

    Since there is no way to regulate Bitcoin other than trying to shut down the internet, some governments in their frustration have taken to attacking and stealing from peripheral support systems like exchanges and payment processors. This latest tantrum thrown by the American DHS is a good example.

    Of course it had the opposite effect from what they intended. After the initial mini-panic, the price quickly rose above what it had been before the attacks. Not only that, but the ensuing publicity has brought even more Bitcoiners onboard.

    Isn’t it fun to watch dinosaurs struggle as they sink deeper and deeper into the tar pits?

  • Michael Shreve

    Bitcoins MAY be an anarchists dream, but ANYTHING that is not a CURRENCY transaction is by definition a BARTER transaction.

    • vicki

      http://www.merriam-webster.com/dictionary/barter

      ———————————

      intransitive verb

      : to trade by exchanging one commodity for another

      transitive verb

      : to trade or exchange by or as if by bartering
      ————————————————————–

      Sorry ANY commodity/object traded including whatever is used for “currency” is barter.

      http://www.merriam-webster.com/dictionary/commodity?show=0&t=1369084234
      ——————————————–
      1: an economic good: as
      a : a product of agriculture or mining
      b : an article of commerce especially when delivered for shipment
      c : a mass-produced unspecialized product

      2a : something useful or valued ; also : thing, entity
      b : convenience, advantage

      3obsolete : quantity, lot

      4:a good or service whose wide availability typically leads to smaller
      profit margins and diminishes the importance of factors (as brand name) other than price

      5: one that is subject to ready exchange or exploitation within a market
      ——————————————————————

      Money, be it sea shells, gold, diamonds, paper (fiat) money are all just commodities designed to make barter more efficient.