Mt. Gox Assets Seized

BitcoinIn a follow up to the Dwolla / Mt. Gox / Bitcoin / DHS story, Feds have seized Mt. Gox’s Dwolla account.  Mt. Gox is accused, by the Department of Homeland Security, of violating money transfer regulations.

Mt. Gox is a Japanese startup and is accused of having failed to register in the U.S. as a money transmitting company.  To accept funds in US dollars Mt. Gox is said to have opened a Wells Fargo business account under their American subsidiary, Mutum Sigillum LLC and the company had to complete a document declaring whether they provide money services or not.  The warrant states: “That document was completed on May 20, 2011, and identified Mutum Sigillum LLC as a business not engaged in money services.”

The warrant goes on to say Mt. Gox’s President Mark Karpeles answered “no” to a couple of key questions: “Do you deal in or exchange currency for your customer? and Does your business accept funds from customers and send the funds based on customers’ instructions (Money Transmitter)?”

And here is where Bitcoin gets involved, many see Bitcoin as a digital currency and not under the regulations of US dollars / fiat money.  However the above questions make it clear that the term funds will be used to include digital currency.  “Mt. Gox acts as a digital currency exchange where customers open accounts and fund their respective accounts with fiat currency, which is then exchanged into crypto-currency by Mt. Gox; the crypto-currency is known as bitcoin…The exchange is bidirectional and allows customers to also exchange bitcoins back into fiat currency, and then withdraw those funds.”  Full text of the Seizure Warrant.

Here may be the first real test of Bitcoin and digital currency.  If Mt. Gox was dealing only with Bitcoins that had been mined and that were being used autonomously as their own separate currency with no exchange to or from fiat money these violations in this warrant may not have been as clear.  So is there a place in the global scheme of currency for a completely autonomous form of payment?  With the mining scheme setup by Bitcoins creaters it seemed there was a chance for that, but once Bitcoins started being exchanged for US dollars their use had to be brought in line with existing laws.

Bitcoins founders may have proclaimed on YouTube that the were going to “revolutionize global finance” in reality it appears they’ve just added another form of currency to the existing dynamic, where laws will find a way or be rewritten to include the new frontier of digital currency.

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