Those that propose regulation of BitCoin aught to become thoroughly familiar with the tragedy that befell the operators of e-gold and Liberty Dollars.

For years people closely familiar with e-gold warned and pressured the operators to become ex-patriots and take themselves out of easy reach to U.S. authorities (Brazil is a familiar country with no extradition treaty - that is MLAT - with the U.S.) Instead, the U.S. e-gold operators sought a legally binding opinion whether they were considered a Money Service Business (MSB) by the U.S. Treasury. If they were, they intended to register in Florida. They were formally told they were not. The reason, apparently, was that the U.S. based company did no exchanges for national monies but rather only held or traded in gold. Of course, this opinion became non-binding as soon as the political winds changed. The e-gold people were indicted, personally bankrupted, e-gold's reserves mainly confiscated and the company left in ruin.

The operators of Liberty Dollar tried to introduce a specie-based (silver) alternative to U.S. dollars. As you can read, the U.S. maintains that it has the exclusive franchise to any money (or in this case, tokens) circulating within its borders which can be used for value exchange.

Further, governments (especially the U.S.) have longstanding regulations enabling them to seize anything they consider of value pretty much whenever they like.

In a letter dated August 12, 2005 and written by Sean M. Thornton, chief counsel for the department's Office of Foreign Assets Control he stated that the government's authority to interfere with the ownership of gold, silver, and mining shares arises from the Trading With the Enemy Act, which became law in 1917 during World War I and applies during declared wars, and from 1977's International Emergency Economic Powers Act, which can be applied without declared wars.

While the Trading With the Enemy Act authorizes the government to interfere with the ownership of gold and silver particularly, it also applies to all forms of currency and all securities. So the Treasury official stressed that it could be applied not just to shares of gold and silver mining companies but to the shares of all companies in which there is a foreign ownership interest. Further, there is no requirement in the law that the targets of the government's interference must have some connection to the declared enemies of the United States, or, really, some connection to foreign ownership. Anything that can be construed as a financial instrument, no matter how innocently it has been used, is subject to seizure under the Trading With the Enemy Act and the International Emergency Economic Powers Act.

Most Americans may be surprised to learn that the Trading With the Enemy Act and the International Emergency Economic Powers Act could expropriate them instantly and far more broadly without any of the due process extended to parties in eminent domain cases. All that is needed is a presidential proclamation of an emergency of some kind -- and of course Americans lately have been living in a state of perpetual emergency.

Are these the people you wish to invite into the BitCoin economy?