The Department of Homeland Security (DHS), has fired the first salvo in what appears to be a crackdown on the secure online currency Bitcoins this week, ordering the seizure of accounts related to the largest exchange for the currency, Mt. Gox.
Tokyo-based Mt. Gox is by far the largest Bitcoin exchange, handling an estimated 63 percent of the global market of the currency, amounting to roughly $450 million worth of volume.
The DHS Immigrations and Customs Enforcement (ICE) office, which has effectively become a catch-all for crackdowns on online activity objected to by the US government, served a warrant (PDF) claiming that despite being foreign-based, Mt. Gox was violating US money exchange laws by operating without a license. They ordered a bank account belonging to Mt. Gox’s subsidiary Mutum Sigilium seized in the crackdown.
The seizure was ordered as part of what officials are referring to as an “ongoing investigation” into the currency in general and Mt. Gox in particular. They have refused to provide additional information, beyond that contained in the warrant.
Mt. Gox issued an initial statement insisting they were unsure of the “scope and/or the reasons” for the move, but has promised additional information as it learns more.
The US Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) has claimed broad authority over all use of “virtual currencies” and has imposed an onerous set of “guidelines” on who it believes is responsible for keeping detailed records of money transfers.
Since Bitcoins are by design a decentralized, secure currency, there is literally no physical way for the US government to effectively shut them down. At the same time, the DHS move reminds us that this isn’t necessarily a deterrent for hostile action at anything the US government deems a threat to policy, and moves against the major public exchanges of Bitcoins could have a deleterious effect on the currency’s use in many perfectly legal transactions.