The past couple weeks have seen some drastic moves by the United States Government and the US Global Illicit Financial Team. Starting with the DHS blocking and seizing Dwolla accounts that were linked to Mt. Gox a little more than two weeks ago, the scene was set for more of the same. The crime in question: Money Laundering and not registering as a money-transmitting service.
This past week the witch hunt continued with Liberty Reserve being the next suspect. Liberty Reserve is a Costa Rica based online virtual currency service similar to PayPal. Founder, Arthur Budovsky, was arrested in Spain and was one of six indicted in connection with Liberty Reserve. The indictment included a ludicrous claim that the service laundered, “more than $6 billion in criminal proceeds” and was “one designed to help criminals conduct illegal transactions and launder the proceeds of their crimes” — essentially accusing most of the users of being involved in criminal activities.
Among the legitimate customers of Liberty Reserve is ePay Cards, a service that functioned like an online pre-paid Master Card or Visa. Mitver Holdings owns ePay Cards and has $28,000 USD tied up in Liberty Reserve accounts at the time of the shutdown. This is not a new territory for Mr. Budovsky, in 2006 he was found guilty for operating Gold Age from his Brooklyn, New York apartment. Started in 1999, Gold Age was one of the first independent e-gold exchangers.
Liberty Reserve is certainly getting a lot of press out of the shutdown but several other sites have also had their domain names seized this past week. Here is a list of other sites shutdown or seized:
Panama based Perfect Money is taking steps to protect itself from becoming a victim of the witch hunt by changing policies to restrict US residents from using their service. They put out this statement:
We bring to your attention that due to changes in our policy we forbid new registrations from individuals or companies based in the United States of America. This includes US citizens residing overseas. If you fall under the above mentioned category or a US resident, please do not register an account with us.
The Dollar / Bitcoin Portal
As we have talked about on the Neocash Radio podcast, efforts by the US government to halt the growth of Bitcoin have focused on points at which dollars are exchanged for the digital currency. This appears to be the primary tactic employed in the State’s strategy.
The Bitcoin network is largely unassailable due to it’s decentralized and distributed nature. With a total computer power leagues ahead of current super computers, there are few options to hinder the digital currency. While this latest trend does not bode well for the services that have existed for years, start-ups and recent Bitcoin based services like bitinstant and bitpay are stepping up to fill the newly created void.
Bitcoin Price Stability
The price of bitcoin across exchanges has remained on a steady upward climb the past two weeks regardless of the bad news generated by government intervention. Many articles and comments were made about how Bitcoin is maturing. I think it more accurate to say that the large number of recent adopters have become more confident in the digital currency.
Mt. Gox USD May 15th – May 30th, 2013 (Source: BitcoinCharts.com)
The volume of trading at Mt. Gox has been trending downward since the $266.00 price point. What effect the most recent shutdowns have had is difficult to parse out. The Dwolla shutdown appears to have had some effect but exact numbers would be difficult to calculate. Mt. Gox remains the highest volume exchange in the marketplace with U.S. Dollars as the most used currency.
Mt. Gox Volume April 2nd – May 30th, 2013 (Source: BitcoinCharts.com)
Other exchanges are growing and seemingly picking up some of the volume lost at Mt.Gox. BitStamp is one of the up and comers with recent days where it traded 50% the volume of Mt. Gox. BitStamp has also moved into second, overtaking BTC-e, for overall volume of USD trades according to the charts at BitcoinCharts.
Regardless of the recent government interventions Bitcoin markets and entrepreneurs are not deterred. Quite the opposite, Venture Capitalists are jumping to be a part of the next bitcoin business, Russian WebMoney is adding a bitcoin payment option for it’s 11 million users, and companies are coming up with innovate new exchanges. The future of Bitcoin is set to be fascinating and more importantly, functional.
It only makes sense when you consider the fact that Bitcoin grants the user a stronger position in terms of control over their money. Capital controls may not be a big thing in the United States but there are many countries who’s residents are looking for a better way to buy what they want and Bitcoin is offering a solution. Bitcoin is a truly international phenomenon, a universal currency devoid of dogma, duty or nationalism and it represents a dynamic change in human evolution. Bitcoin returns to the individual the power of money in a civilization ruled by money.