And it just continues!!!
Dept. of Homeland Security freezes accounts between Dwolla and bitcoin exchange Mt. Gox
In the first governmental action against bitcoins, the Department of Homeland Security served the Dwolla mobile payment service with a court order requiring it to immediately cease all account activities with the Mt. Gox Bitcoin trading platform. Dwolla has complied with this order.
The news was first reported by Betabeat citing an email that OkCupid co-founder Chris Coyne received from the DHS and posted in an online forum. Other users have subsequently reported receiving similar communications from the federal agency and having difficulty accessing funds transferred to Mt. Gox from Dwolla in the last 24 hours.
There are certainly more questions than answers at this stage. We are prompted to wonder whether this is this the first of a series of governmental assaults on the exchanges? That’s what they’d target if they want to put the kibosh on bitcoin. Or, is this a case where DHS is investigating some individual or organization who may have used bitcoins, via Dwolla, for some potentially nefarious or terroristic reasons?
Members of the PandoDaily team have spoken to sources close to the bitcoin ecosystem and have been hearing that it’s likely the former.
As Adam Penenberg wrote recently:
It’s conceivable the government will try to either regulate or destroy it if it becomes widely adopted. With more than $1 billion worth of Bitcoins in circulation that could happen any time now. In the past the government has aggressively fought back threats to the U.S. dollar’s preeminence. There’s the lesson of Bernard von Nothaus, a “monetary architect” who created his own currency based on precious metals called the “Liberty Dollar.” After von Mothaus managed to inject some $60 million of his homemade currency into circulation, a government prosecutor accused him of “domestic terrorism” for attempting to undermine the government. Unlike with Liberty Dollars and Wikileaks, there’s no single person identified with the movement.
The cryptographic-based virtual currency has gained popularity at a dramatic rate in the last six months, with more than $1 billion worth of the virtual currency now in circulation and with an explosion in the number of physical and virtual businesses accepting the virtual currency. Japan-based Mt.Gox is the largest exchange in the ecosystem handling roughly 63 percent of all bitcoin transactions in April 2013. Despite the rapid growth – or perhaps as a consequence of it – things haven’t always been easy, with a number of security breaches in critical ecosystem infrastructure and several post-speculative sell-offs.
Most recently, US-based bitcoin exchange startup CoinLab sued Mt. Gox for $75 million alledging breach of contract related to a partnership between the two companies. According to the lawsuit, CoinLab entered an agreement to license Mt. Gox’s technology, including “exclusive right to certain intellectual property” to exclusively provide exchange services Mt. Gox’s North American customers. The plaintiff, which is backed by Tim Draper, Geoff Entress, Peter Vessenes, and others, claims that Mt. Gox breached this agreement by dealing with North American customers directly and failing to share data as stipulated under this agreement.
There’s no immediate link connecting the Coinlab lawsuit to today’s Department of Homeland Security action regarding Dwolla, but the timing of both events raises some questions.
We have reached out to a number of bitcoin investors, entrepreneurs, and otherwise informed observers for their thoughts on today’s events. This is obviously an evolving situation and we will strive to update the situation as more information becomes available.
*I know I’ve already posted an article I wrote about Internet Freedom but as soon as I get a moment, the gloves are coming off and I’ll get down to brass tacks on this subject. This might not directly effect you now but rest assured this is laying the foundation for the future of cyber-space and that DOES effect you!!!!!!!!