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back to article Feds stamp on cash pipeline to Mt Gox, Bitcoin's Wall Street

The Department of Homeland Security has frozen an online trade route between US citizens and Mt. Gox - the world's largest exchange of crypto-currency Bitcoin. The move will be interpreted as an opening skirmish in a battle to control the electronic cash, which has exploded in popularity and so far avoided regulation by …

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Black Helicopters

>which means they must hand over transaction information to the government and work to prevent money laundering.

Hah, good luck with that.

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Anonymous Coward

And so it began.......

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Orv

Time to switch to another imaginary currency. I suggest Linden Dollars.

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Orv

Re: Warnings from History: Wikileaks... Cyprus....

The Cyprus haircut was about as quiet and unexpected as a 4th of July parade. *I* heard it was coming weeks ahead, and I don't even follow financial news very closely. The fact is, in spite of all their outrage, the foreign investors who had money in Cyprus banks knew exactly what they were getting into. In the current economic climate, banks don't promise 9% APR on savings accounts unless they're on the verge of collapse.

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Anonymous Coward

Re: Warnings from History: Wikileaks... Cyprus....

The timing of the destruction of Cyprus is interesting. It occurred just after major Euro banks had closed all their outstanding 1 year deposits (earning ~5% rather than ~0.5% in Germany). These deposits far exceeded any so-called 'oligarch deposits'.

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@orv / Linden dollars

>>Time to switch to another imaginary currency. I suggest Linden Dollars.

How about using Magic The Gathering game assets? We could even name the Online Exchange we use after it...

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On the subject of Linden Dollars

Have a look at VirWoX. Focused on Linden Dollars but you can then change your Linden Dollars straight into Bitcoin. And they take PayPal.

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Re: Warnings from History: Wikileaks... Cyprus....

Wikileaks funding was blocked as the payment gateways of Visa, Mastercard, and Paypal are all US based and controlled. That is an entirely different proposition to blocking financial transactions in all currencies, or at least in all stable ones that would be reasonable to use.

You are worried about laws being passed to block cashing out of bitcoins just like Cyprus?

1. The Cyprus cashing out blockade wasn't that effective as the wealthy could just withdraw their money from the UK branch of Cyprus Bank. Plenty of money rolled out but that method or others.

2. Again, to prevent cashing out you would need to block it happening in all reasonably currencies on the planet simultaneously.

3. There would undoubtedly be a drop in value but, given you cannot take my bitcoins from me like you can my savings I am still free to trade them for goods and services which, after all, is the point of money.

Unless you can block all the exits and prevent acceptance for goods and services you fail. I may not be able to swap them for dollars but as long as I can swap them for things I want I can accept them myself. I don't have to take all payment in them.

This inability to control and take what is not theirs is what frightens Governments, especially as they are all increasingly bankrupt, both morally and financially.

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Re: Warnings from History: Wikileaks... Cyprus....

The US Government doesnt control all currencies. There will be other currencies in the world that will accept BTC etc. Not just dollars, then you just exchange them for dollars. Simple.

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Stop

Re: Warnings from History: Wikileaks... Cyprus....

"The US Government doesnt control all currencies."

Silly rabbit, if the US government stamps it out others may well follow, particularly if the aforementioned US government decides to throw its considerable weight around.

That said, I'd rather bitcoins were allowed to fail on their own merits rather than be stamped out, because the libertarian squeals of big-government persecution will echo round the net for years, annoying the crap (further) out of me.

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Anonymous Coward

all your money belong to us

it must be very uncomfortable for any democratic government to have so much cash flowing, and being unable to control it. And take a cut.

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Stop

Betting against the MAN

I hope they can't do anything, I really do. Money in the US is manipulated on a daily basis so much so that it swings wildly sometimes. I've taken a quick peak at BC and was impressed by the system (despite my admitted shallow understanding). I hope it can remain outside of any government influence (US or otherwise).

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Unhappy

Re: Betting against the MAN

" I hope it can remain outside of any government influence (US or otherwise)."

A lovely idea. But it ain't going to happen. How do you think that governments around the world continue to spend VASTLY more than they raise in taxes, year in, year out, without the whole system collapsing?

The answer is by more or less subtle forms of expropriation (that's theft by the state, to you and me). Tax is part of this. Inflation is another. State mandated programmes are another (eg where companies have to do something for the government that they don't get paid for by government). And when things get really bad, the state just steals outright - happened in Cyprus a few weeks back, happened in the US under that crook Roosevelt a few decades back.

So any form of money that they can't monitor or control (or steal) is a threat to the politicians, to the state bureaucracy like the tax collectors and administrators. Bitcoin, sadly, is doomed.

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Re: Betting against the MAN

Ever since Nixon took the US off the Gold Standard (followed or preceded by everyone else) our "money" is all fakery anyway. I could see the United States at some near future just declaring ALL DEBTS ARE erased.

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Big Brother

Re: Betting against the MAN

These debts are held by cronies and well-connected ones (imagine Cheney or Prince hearing "your companies won't actually be paid, sorreeee?"), so no.

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Orv
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Re: Betting against the MAN

I expect Bitcoin itself will remain largely unregulated. It's the point where Bitcoins are exchanged for real US dollars they're interested in, since that can become a conduit for money laundering.

Also, taxation is only "theft" if you aren't getting anything in return. People who hope to avoid taxes via alternative currencies or other dodges are just trying to get the benefits of a functioning government without having to pay for it.

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Orv
WTF?

Re: Betting against the MAN

Not that I like Nixon, but by that point we were on the gold standard in name only. The dollar's value relative to gold had been repeatedly adjusted.

But there's nothing magic about gold. It has very little practical use, so it really amounts to yet another currency that has value only because we agree it does. During the era of money being linked to gold, we had inflation when there were large gold strikes and deflation when there were gold shortages. Favoring a gold standard is just another way of saying that guys in other countries digging with shovels will regulate the economy better than the Fed. You might honestly believe that's true, but at least be up front about it.

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Meh

Re: Betting against the MAN

Exactly, Bitcoin itself is decentralized by design and would be incredibly hard to shut down (it would need blocking at an ISP level to prevent the various wallets from syncing)

MtGox is based in Japan which is why they went after Dwolla, which is US based and only for US citizens. Other exchanges are based all around the world and use various payment providers. This move has not shut down MtGox just made it a little harder for US based people to deposit to gox.

Remember there are two absolute guaranteed parts of life, Death and Taxes. If you make a profit trading Bitcoins you still have to pay tax on it just like any other asset. The state may be crap at chasing down muggers,robbers etc but if you do not pay your taxes they will come down on you with the full force available.

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Re: Betting against the MAN

@Orv: "Also, taxation is only "theft" if you aren't getting anything in return."

No. Consider this: I tell you that you will buy this TV from me for $1000 or I'll force you to do it at gunpoint. It's a TV that you (a) do not want, (b) have no use for, and (c) could buy for $500 in any case.

At this point there is little that govt provides that I want, and of those things that I do want I could get a much better deal elsewhere from businesses that don't threaten me with force if I choose not to deal with them.

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Orv
Coat

Re: Betting against the MAN

I'd suggest relocating to Somalia, then. There's no functioning government to worry about, and you can negotiate directly with the local businessmen who provide military and police functions in each region. (We usually call them "warlords," but that's just semantics.) It's libertarianism in action.

Me, I'll stay here and keep paying my taxes.

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Re: Betting against the MAN

The old "move to Somalia" argument, eh? Unoriginal, Orv, and inapplicable. I like where I am: I like the people and the location. It's the govt I don't like. Why don't you suggest that the govt go to Somalia? BTW, I can buy voluntarily on the open market all the military and police services I really need, and get them with out all those ugly wars I don't want to fight, or SWAT raids on the wrong addresses.

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Orv

Re: Betting against the MAN

Because Somalia is what a state without a strong central government becomes.

Let's say, in your imaginary governmentless state, you buy your own police and military services. But so do your competitors. Guess what happens if they want you shut down? Now you're a warlord, trying to defend your territory against a rival warlord. Except you have a sign on your door that says "CEO." Well done.

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@Alan Esworthy Re: Betting against the MAN

"I like where I am: I like the people and the location."

How much of what you like about the location is due to govt services? How you likin' those roads and parks and emergency services? Sure, you could get many of them from private industry. I'm sure they'd love to see the govt sector wither away so they wouldn't have to worry about the competition when they set their prices. Oh, and they'll decide what services are profitable to maintain whether it's in your interest or not...

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Boffin

Re: @Alan Esworthy Betting against the MAN

@Vector: "How much of what you like about the location is due to govt services?"

None of it, for the reason given that you evidently did not understand or choose to ignore. I respectfully suggest that you and Orv examine some heretofore unexamined assumptions of yours (you're not alone, not by a long shot): that govt as a coercive institution is required to achieve a peaceful, orderly, and productive society. Hint: how many of your day-to-day dealings with your neighbors and local businesses are coerced? None or next to it, you say? You already are at least partially living the life of a peaceful, orderly, and productive anarchist.

Govts tend towards negative incentives. I prefer positive ones.

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Orv

Re: @Alan Esworthy Betting against the MAN

I have no doubt that some of my peaceful, orderly neighbors would happily steal me blind if they believed there was no entity that could punish them for it. One doesn't have to look far to realize this; even highly civilized places quickly revert to violence and looting if there's a temporary absence of government-enforced law and order. You don't have to look as far as Somalia to see that; just look at the looting and violence that happened after Hurricane Katrina, or during the 1977 blackout in NYC.

Throughout human history, power and wealth have always gone to whoever could most convincingly threaten violence against other people. It's the natural state of humanity. This is why revolutions almost always end as military dictatorships (our own revolution in the US was a fortunate exception.)

As I see it, government is an exercise in giving the biggest guns to an entity that we have some amount of control over, instead of leaving the choice of our rulers up to chance and violence. Given that I couldn't even hire a mall cop for what I pay in taxes, much less my own private police force, I'm going to stick with it.

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Anonymous Coward

On becoming a warlord

Actually, that sounds pretty good. I'll think it over.

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Re: Betting against the MAN

Not that I like Nixon, but by that point we were on the gold standard in name only. The dollar's value relative to gold had been repeatedly adjusted.

But there's nothing magic about gold. It has very little practical use, so it really amounts to yet another currency that has value only because we agree it does.

And a commodity-backed currency can be converted into a fiat currency by the guarantor at any time. Since the government has a monopoly on violence (that's what makes it a government), it can't be compelled to honor its guarantee to convert the currency back into the commodity that supposedly backs it. It's all a combination of good faith (for ordinary users of the money) and risk assessment (for speculators), regardless of the notional source of value.

Moneys historically have come from two sources: top-down money created by governments, and bottom-up money created by independent economic agents (generally ordinary folk). Top-down moneys often start by the government standardizing amounts of divisible, portable commodities: so the king stamps his likeness on equal-size chunks of a precious metal, for example, to say "this is really one pound of silver". Bottom-down moneys often start as tokens that represent contracts, like the Mesopotamian clay balls; what begins as a set of specific contracts gets pared down into a smaller set of standard ones that are then traded for nominal value (I give you a goat in exchange for two lamb futures, which I then hand over to my landlord for rent on my fields).

In either case, though, the value of the money ultimately rests on widespread agreement to treat it as a representation of value. Top-down and bottom-up moneys are both vulnerable to losses of confidence; governments fall, people succumb to financial panic, etc.

Sometimes a top-down money becomes a bottom-up one, or vice versa. In Somalia, the formerly government-backed currency became worthless, then started going back into circulation because people wanted some kind of token of value for regular household-economic purposes. Equivalently, there's nothing all that unusual about a government deciding to impose regulation on a bottom-up currency. That's what governments do - they govern things. These days, they mostly do that by majority consent (which actually takes the form of majority ignorance and indifference), because that's a hell of a lot cheaper than doing it through violence; but they can always whip out the violence when they think it offers a good return.

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Anonymous Coward

A non-merkin writes....

What exactly has this to do with the Department of "Homeland Security"? I thought they were all about stopping people who looked too Arab flying on US aircraft and Mexicans crossing the Rio Grande? Surely issues with banking would be dealt with by the Treasury?

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Orv
Pint

Re: A non-merkin writes....

US banking regulation is managed by a whole raft of different agencies, with overlapping responsibilities. It's kind of a mess. Generally industries lobby to have their particular slice of territory regulated by whichever agency they think will have the fewest resources for policing their activities.

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Anonymous Coward

Re: A non-merkin writes....

It will likely come under money laundering as according to the media Bitcoins are used solely for the purchase of drugs/guns/child slaves/suitcase nukes etc.

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Trollface

Re: A non-merkin writes....

"Mexicans crossing the Rio Grande?"

I think you mean "Rio Bravo" ;)

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Re: A non-merkin writes....

The second largest use of Bitcoins, after speculation, appears to be the sale of drugs on Silk Road. If you are buying Bitcoins, there is a good chance that you are buying them off drug dealers, as the speculators aren't selling, and thus indirectly and without realising it, helping them to cash out. That's why Homeland Security is involved. What I describe may not be true, but they think it is, which is what matters.

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IT Angle

Re: A non-merkin writes....

bitcoin funds terrorism - just like pirating films does. Also if you dont love your bank provider you are probably a terrorist too.

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Re: A non-merkin writes....

In two words: Drug trafficking.

DHS actually had nothing to do with improving homeland security; it was just an excuse to roll a bunch of agencies up into one even more uncontrollable tentacle of Leviathan. DEA was part of the roll-up. Part of the way DEA tracks drug traffic is money laundering. Bitcoin looks to me like a great way to launder money.

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Big Brother

Admiral Pointdexter would have loved to have had this service.

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Meh

Meh.

The first paragraph sent my brain into full alert. But then the second one mentions "Dwolla". Meh. That's a US-only thing, and in fact it once was suspended from Mt. Gox for chargeback frauds.

The note is really more about "Dwolla curbstomped by DHS". Sure they're probably going after Mt. Gox, but they're basically stomping a US-only company.

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Re: Meh.

Mt Gox has a .com...that'd be the obvious next move. Let's hope they've got some other TLDs too.

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Re: Meh.

First you roll up the street dealer and make him squeal on his supplier. Then you move to his supplier. This is money laundering they're talking about here. Excluding maybe the Swiss, there are all kinds of multi-lateral agreements in place for money laundering and drug trafficking charges. Because none of the governments get their protection money from either of those practices.

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Anonymous Coward

Listen up!

My imaginary money is worth more than your imaginary money!

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Re: Listen up!

All money is imaginary, unless it is actually made of something useful. Gold doesn't count, as it is essentially useless, and the supply tightly controlled. Barter is the only really non-imaginary financial scheme, and that doesn't use money!

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Mushroom

The trouble with law is someone must enforce it

I like a basically peaceful environment and also appreciate how law saves effort and boosts trade in many ways, but in general I think the least amount of it possible is best. I myself would divulge to the government your private data, if it appeared you were in the process of arranging to murder my fellow citizens. But I would not do so to assist someone in protecting anything intangible, such as their reputation, or desire not to be libeled, or desire to enforce an alleged right to non-material property. And absolutely not to assist anyone to collect a tax or to enforce a drug law, or a money laundering law.

I'd rather have no protection in cyberspace, than any at all, if to get that I had to in any way acknowledge or be affected by anyone's ideas of what is right, that go beyond physical safety of physical persons and physical property.

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Stop

I think we need a Godwin's Law for BitCoin

"As an online discussion on BitCoin grows longer, the probability of mentioning "fiat currency" approaches 1"

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Joke

Fiat!

Where can I buy this Fiat Currency, and what's its top speed?

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Trollface

Better idea for currency

There are supposedly going to be 21 million bitcoins created and you can trade fractions of them.

Instead, why don't we just create 21 million unique large numbers and sell the rights to fractions of the value of owning the number. The numbers themselves will be protected under copyright law as it's already well established that possession of a certain sequence of numbers is a protected under copyright.

That way we don't need to do anything about security either, if someone "spends" my fractional share in the rights one of the numbers without my permission then the government can prosecute them for "piracy" and I can claim damages that are much higher than any intrinsic value of the number simply based on what I consider the value to be.

This doesn't even require any new law, the principles already all exist.

(Yeah ok, so it's stupid but where is the flaw?)

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Re: Better idea for currency

I wish that was more funny and less true.

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Re: Better idea for currency

We don't even need large numbers. Here in the US, everything anyone writes is automatically protected by copyright, and thanks to Berne + WCT this extends to numerous other countries automatically. So we can just assign value to small written works and then use fractional shares of them as currency.

I'll pay you five Reg upvotes for rights to your scheme. I'm good for 'em - just check my profile.

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Unhappy

That'll be me moving to Itchy and Scratchy Money then.

Those pesky Feds can't touch them.

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