The United States Department of Homeland Security shut down Mt. Gox’s ability to accept or send transfers using mobile payment service Dwolla last night. According to the warrant, a Homeland Security special agent believes Mt. Gox is guilty of the crime of operating an “unlicensed money transmitting business.” After an undercover informant used the service to purchase bitcoins and convert them into dollars, the funds were traced through a Wells Fargo bank account opened by Mark Karpeles, president and CEO of Mt. Gox.
Bitcoin CEO Mark Karpeles
As noted in a recent Techcitement article on bitcoin, the federal government now requires bitcoin and other similar e-currency exchanges to register with FinCEN as money transferring businesses to comply with the law. The violation is punishable by a fine or up to five years of imprisonment.
While the details of the warrant make it clear that Mr. Karpeles denied operating a currency exchange on forms provided at the time he opened the bank account, I have bigger questions than whether or not he knowingly violated this law. First off, why is Homeland Security pursuing this, when it appears to deal with simple banking regulations? And secondly, why is a virtual currency exchange held to the same legal standards as holders of U.S. dollars while not receiving the same legal protections?
The urgency of this shutdown feels like something more associated with a large money laundering scheme to be revealed. Instead, this appears to be the U.S. government taking a greater interest in controlling bitcoin transactions and testing its legal reach in the matter.
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