Senators seek crackdown on "Bitcoin" currency

[Ted Smith]

I'm guessing this is why prices broke 20 and then 30 USD in the last two
days!

<http://www.chicagotribune.com/news/politics/sns-rt-us-financial-bitcoitre757
3t3-20110608,0,6328122.story>

Senators seek crackdown on "Bitcoin" currency

ST. LOUIS (Thomson Reuters Accelus) - Two senators are pressing federal
authorities to crack down on an online black market and "untraceable"
digital currency known as Bitcoins after reports that they are used to
buy illegal drugs anonymously.

Democratic Senators Charles Schumer of New York and Joe Manchin of West
Virginia wrote to Attorney General Eric Holder and Drug Enforcement
Administration head Michele Leonhart in a letter that expressed concerns
about the underground website "Silk Road" and the use of Bitcoins to
make purchases there.

The letter prompted a discussion among Bitcoin enthusiasts about whether
the government was capable of closing related bank accounts and thereby
stifling the currency.

The senators released a copy of their letter on Monday. It cites recent
media reports that some tech-savvy individuals were using an
"anonymizing network" known as Tor to gain clandestine access to Silk
Road and buy illegal drugs.

Silk Road buyers pay with Bitcoins and sellers mail the drugs, the
Gawker blog reported. The transactions leave no traditional money trail
for investigators to follow, and leave it hard to prove a package
recipient knew in advance what was in a shipment.

"The only method of payment for these illegal purchases is an
untraceable peer-to-peer currency known as Bitcoins. After purchasing
Bitcoins through an exchange, a user can create an account on Silk Road
and start purchasing illegal drugs from individuals around the world and
have them delivered to their homes within days," the senators' letter
states. "We urge you to take immediate action and shut down the Silk
Road network."

The DEA is "absolutely" concerned about Bitcoins and other anonymous
digital currencies, agency spokeswoman Dawn Dearden said when asked for
a response to the senators' concerns.

"The DEA is constantly evaluating and analyzing new technologies and
schemes perpetrated by drug trafficking networks. While we won't confirm
or deny the existence of specific investigations, DEA is well aware of
these emerging threats and we will act accordingly," she said.

Silk Road may be hard to close. It could easily move from server to
server around the globe and change its Web address and name at will,
while remaining accessible through Tor.

However, Bitcoins must be purchased with real money; of late, they have
been selling for roughly $10 each.

Therefore, there are exchanges with bank accounts, such as the Mt. Gox
Bitcoin Exchange, that the Justice Department and other law enforcement
agencies may be able to target. It is this weak link that worries the
currency's enthusiasts.

A discussion thread this week on the primary Bitcoin forum was titled
"Will Mt. Gox US Bank accounts eventually get frozen?" Some speculated
that if the government bans transactions involving Bitcoin exchanges, a
layer of shell companies might allow them to continue.

One user described this process as simply "growing pains" and asserted
that the government "can't stop a peer-to-peer service."

U.S. law enforcers might have difficulty stopping Bitcoins without help
from their peers in other countries.

While little information about Bitcoin exchanges is publicly available,
an item posted on a website called Bitcoin Watch states that Mt. Gox's
bank account is in Japan, and anecdotal evidence suggests many other
exchanges operate outside of the US.

Mt. Gox's website does not list a phone number, representatives could
not be reached via email.

(Editing by Randall Mikkelsen)

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