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thoughts and ramblings of a pedal powered geek

BTC Exchange Gets Raided

While talking on IRC earlier, this article came up in the channel.

Now, normally I avoid reading about bitcoin, simply because I am too late in the game to really do any mining and don’t feel like making an investment, but the fact that an exchange was seized was of interest to me.

From TFA:

The warrant claims Mt. Gox CEO Mark Karpeles did not disclose he operated a financial transfer site when he opened a new bank account for the business. Money transmitting services, according to Gawker, are required to register with the Department of Treasury’s Financial Crimes Enforcement Network (FinCen).

I find this interesting, mostly because of the implications here. If a USD->BTC and BTC->USD exchange is considered a money transmitting business, then BTC is now considered money by the DHS. As it stands with BTC not being recognized as currency, then the operation of this business is no different than an online gift-swapping marketplace and the DHS has no grounds to take action. For instance, if I buy a gift, give it to you, and you sell it, is that a money transfer? If not, then why would that be any different with BTC? Unless BTC were money. But does any government want to set that precedent right now?

Later on in the article is this gem:

“Literally, it allows buyers and users to sell illegal drugs online, including heroin, cocaine, and meth, and users do sell by hiding their identity through a program that makes them virtually untraceable,” Schumer said during a 2011 news conference. “It’s a certifiable one-stop shop for illegal drugs that represents the most brazen attempt to peddle drugs online that we have ever seen. It’s more brazen than anything else by light years.”

This is like saying bittorrent is for piracy and should be banned. Bittorrent is a general purpose file transfer protocol. Some people use it for piracy. Some people have also been known to use FTP, HTTP, SMTP and even DNS for piracy. What this quote is describing is most likely the online black market known as “Silk Road”. Silk road is to bitcoin as the pirate bay is to bittorrent. At best this statement is fear mongering and sensationalizing and propaganda. At worst, it’s downright libelous. Do they not think people buy drugs over the internet with USD? A PayPal account, a prepaid credit card, and someone to buy from are all you need to buy drugs online anonymously. Or what about buying some WoW gold and giving it to someone in game in exchange for some drugs? Is Blizzard registered as a money transfer service? Or would IGE be the one who’d have to be registered? I’d even wager to say that WoW gold is a more secure (in the “I’ll be able to keep it” sense, not the “it won’t fluctuate in value” sense) than BTC, and much easier to come by with many more users!

I get that governments are afraid of BTC. I can understand it, and even to a degree sympathize with them. I’m a hard working, tax paying, law abiding American. I may not enjoy paying my taxes, but I do so because I realize that government can’t operate without income, and I rely on the services the government provides for my daily life. But please don’t use silly arguments like this to try to discount a budding alternative currency.

I’m not a BTC user. I like a lot of the concepts surrounding BTC, but as much as it purports to be “secure”, “anonymous”, etc., I see too many flaws with the system to be willing to invest much money or time into it. I could write a whole post about my concerns, but at the very least I’m concerned with wallet theft, and that’s enough to stop me from using it in a serious fashion.

I am, however, very interested in the outcome of this action. The DHS has made a very bold move here, and whatever happens will set a precedent, so they have to be very careful moving forward.

Now where’s my popcorn popper?