http://www.ft.com/intl/cms/s/0/9ecefa7c-bda6-11e2-890a-00144feab7de.htmlMay 16, 2013 12:04 am
US seizes accounts of Bitcoin exchange
By Stephen Foley in New York
US authorities have seized bank accounts belonging to the world’s biggest Bitcoin exchange, marking a signature moment in their dealings with the virtual currency.
The Department of Homeland Security won court orders freezing the contents of two accounts used by Mt Gox, the Japan-based exchange which accounts for more than half of all trades between Bitcoin and government-backed currencies.
Mark Karpeles, Mt Gox chief executive, failed to declare he was operating a money transmitting business when he opened an account with Wells Fargo in May 2011, according to a warrant made public on Wednesday.
The federal authorities have seized the contents of the Wells Fargo account and also an account with the payments processor Dwolla, which many US Bitcoin holders use to transfer money to Mt Gox.
On its website, Mt Gox said it was investigating the development but provided no further details.
“Money transmitting businesses are required to register as such with FinCEN [the Financial Crimes Enforcement Network], a unit of the US Treasury,” the warrant said. As of this month, neither Mt Gox, nor its Delaware-based subsidiary Mutum Sigillum, had registered.
Bitcoin was created four years ago by an unknown computer scientist, and transactions are recorded on a decentralised network of computers. Adherents believe it could become an alternative to government-run currencies and a cheaper alternative to using the international banking system.
Lawmakers, however, have expressed concern it could be used to evade checks against money laundering and terrorist financing.
“There are really good reasons why we regulate financial institutions,” said Jim Angel, professor at the McDonough School of Business at Georgetown University. “Given the emphasis on money laundering, there is no way governments will allow a truly anonymous system that could be used by terrorists, drug smugglers and other types to evade law enforcement.
“It should not be surprising that the authorities have taken steps against Bitcoin businesses to either shut them down or to bring them into regulated channels.”
FinCEN clarified in March that businesses acting as brokers or transmitters for Bitcoin and other virtual currencies needed to register as money service businesses. It said at the time that it was issuing the clarification “in response to questions raised by financial institutions, law enforcement and regulators”.
Operating a money transmitting business in the US comes with potentially costly obligations to introduce anti-money laundering processes, including reporting large transactions to the Treasury.
Senior figures at the Commodity Futures Trading Commission this month said they were considering regulating Bitcoin businesses. And in the UK, government officials gathered this week to discuss how to deal with the emergence of the virtual currency.
