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Discussion => Security => Topic started by: ruby123 on May 15, 2013, 09:22 pm
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http://www.forbes.com/sites/kashmirhill/2013/05/15/the-feds-are-cracking-down-on-mt-gox-not-on-bitcoin/?utm_campaign=forbestwittersf&utm_source=twitter&utm_medium=social
The Feds Are Cracking Down On Mt. Gox (Not On Bitcoin)
Mt. Gox, the Japanese exchange that’s responsible for the lion’s share of Bitcoin buying and trading, is having a rough month in the U.S.
First it was sued by CoinLab, a Seattle start-up that claims Mt. Gox dropped the ball on an agreement they inked in November 2012 that would have put CoinLab in charge of Mt. Gox’s North American accounts. In a legal complaint for breach of contract, CoinLab says Mt. Gox owes it $75 million in damages for not following through on their agreement to hand Mt. Gox’s American and Canadian customers over to CoinLab. In that complaint, CoinLab noted one of the huge benefits of the partnership to the Japanese Bitcoin giant: “CoinLab is registered with FinCEN to provide Bitcoin exchange services in the United States and has fully complied with FinCEN’s March 2013 guidance for digital currency exchanges.”
21 Things I Learned About Bitcoin From Living On It For A Week Kashmir Hill Kashmir Hill Forbes Staff
FinCEN is the Financial Crimes Enforcement Network, the bureau of the Treasury Department that seeks to prevent money laundering, terrorism financing, and other financial no-nos. In March, it issued guidance for those dealing in virtual currencies, saying that exchanges need to register as Money Services Businesses (MSBs) and comply with anti-money laundering regulations. Mt. Gox’s failure to partner with a FinCEN-approved U.S. agent is leading to its second big headache this month. As first reported by the New York Observer, the Department of Homeland Security has some issues with how Mt. Gox is running its American operations. In a warrant filed in Maryland and obtained by Ars Technica, a special agent with Homeland Security Investigations [HSI] states that the department is seizing accounts associated with Mutum Sigillum, a U.S. intermediary that Mt. Gox had been using to exchange Bitcoins for U.S. dollars. The problem is that Mutum Sigillum is not registered as a money transmitter with the Treasury Department.
“The recent FinCEN guidance stated that exchangers of virtual currency are money transmitters for the purpose of FinCEN regulations,” says James Freis, counsel at Cleary Gottlieb. ” Failure to register with FinCEN and to meet those regulatory requirements can be a criminal violation.”
The man in the hot seat is Mark Karpeles, Mt. Gox’s CEO who also owns Mutum Sigillum and who claimed when he opened a Wells Fargo account for the latter in May 2011 that his business would not be exchanging currencies for customers nor acting as a money transmitter. HSI says that Karpeles has been using payment processor Dwolla to allow customers to buy Bitcoins, and using Mutum Sigillum to transfer money back and forth from Dwolla to Mt. Gox. HSI has now seized the money in both the Wells Fargo and Dwolla accounts, meaning Bitcoin users can’t use Dwolla right now as a way to buy, sell, or transact their Bitcoins. Iowa-based Dwolla offered an easier way for people to buy or sell Bitcoins through Mt. Gox, rather than doing international wire transfers to and from the company’s Japanese bank. (When I tried to buy my Bitcoins from Mt. Gox, Bank of America refused to send a transfer to the Japanese account; I used U.S.-based Coinbase instead, which recently nabbed $5 million in venture capital funding from Union Square Ventures and which is, reassuringly, registered as a money transmitter with the Treasury Department.)
It’s important to note here that Homeland Security is not cracking down on Bitcoin itself, just on how it’s being exchanged by Mt. Gox. This is actually good news for Mt. Gox’s US-based competitors, such as Seattle-based CoinLab and San Francisco-based Coinbase, Bitcoin exchanges that have registered with the Treasury Department as money transmitters and thus are in the legal clear to conduct Bitcoin <—> $ exchanges.
Mt. Gox’s legal troubles don’t seem to be affecting the value of Bitcoin, which has been hovering in the $115 range for the last week.
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The Feds Are Cracking Down On Mt. Gox (Not On Bitcoin)......It’s important to note here that Homeland Security is not cracking down on Bitcoin itself, just on how it’s being exchanged by Mt. Gox.
I hate to tell you this but you are wrong. This is just the first major salvo in a war that won't be won until the U.S. (gov't) and major world banks control the competition, i.e. Bitcoin. They will not tolerate even a fringe threat to their control of world currencies. This is true in every upstart that has come along. Including precious metals, gems, etc. You are either in the controlling party or you don't exist. Watch and learn, my friend.
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And how will the government stop person to person transactions of cash for Bitcoins?
Oh yeah- they can't. It's like banning illegal guns, drugs, alcohol, or whatever else the government sees fit to control. Not gonna happen.
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And how will the government stop person to person transactions of cash for Bitcoins?
The same way they control cash and most BTC transfers now. I don't get your point but here's the long range theory. I want some Bitcoins. I try to get some by my tried and true method of going to 7-11 or Wally world to pay cash for a bitinstant transfer. Oh, I'm sorry, we now require two separate forms of id and a two week initial waiting period (this hasn't happened, yet). So, all doors except the back ones are being closed off. Sure, early on you will find those who will do the backdoor trades of coin for cash. But soon, even those transactions will have to be verified and confirmed by the central clearing house before they become valid. It won't be hard to implement at all since ALL transactions that go through now are tracked down to the .000001. I mean, this theory is sound to me (in my paranoid state). I hope I am wrong but if history is any indicator, which it always is, we will have to find another currency at some point fairly soon, imo.
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To be fair, Mt Gox apparently never registered with FinCEN as a MSB. Stupid stupid stupid mistake on their part - especially considering the size of their business. Idiots.
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Sure, early on you will find those who will do the backdoor trades of coin for cash. But soon, even those transactions will have to be verified and confirmed by the central clearing house before they become valid.
Bitcoin is a completely decentralized protocol. Although most trades these days take place on Mt. Gox, I've never placed a trade there. In fact, all of my trades have been made locally, face to face with someone either holding cash or BTC. No middleman involved. No bank involved. And definitely no government involved.
I'm not sure where you get this "central clearing house" concept from. There's nothing in the Bitcoin protocol which has anything of the sort.
If I want to meetup with someone locally and swap cash for BTC or vice versa, how is a banking or government entity going to stop us from transacting? Think about it.
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To be fair, Mt Gox apparently never registered with FinCEN as a MSB. Stupid stupid stupid mistake on their part - especially considering the size of their business. Idiots.
I agree totally. In fact, they are so amateurish, it's hard to believe they've been so successful so far. Keiser and Herbert detailed in depth just how bungling and inept they truly are.