The Mt. Gox Warrant

The problem here is that Mt. Gox is operating as an unlicensed money transmitter.

With their recent guidance, FinCEN decided that virtual currency exchangers are money transmitters.

“An administrator or exchanger that (1)accepts and transmits a convertible virtual currency or (2) buys or sells convertible virtual currency for any reason is a money transmitter under FinCEN’s regulations.”

Mt. Gox is not a US company; however, it does a lot of business in the States and is not registered with FinCEN.

An informant working with a Homeland Security agent signed up for both Mt. Gox and Dwolla accounts. After making a few transactions, he was able to determine that his funds had gone through a Wells Fargo bank account owned by Mt. Gox and opened by the exchanges’ CEO Mark Karpeles. The account was opened by Mark in May 2011 who at the time signed a Wells Fargo form declaring that his business was not a Money Services business or a Money Transmitter.  Of course this was almost 2 years prior to FinCEN’s guidance on the issue.

The Warrant states that Mt. Gox is in violation of 18 U.S.C. section 1960. The punishment for this can include fines and up to 5 years in prison.

Ars Technica obtained a copy of the warrant which can be read here.

Homeland Security orders Dwolla to cease payments to Mt. Gox

Via BetaBeat

The Department of Homeland Security appears to have shut down the ability to use Dwolla, a mobile payment service, to withdraw and deposit money into Mt. Gox, a Bitcoin trading platform. A Dwolla representative confirmed the move to Betabeat.

A representative for Dwolla told Betabeat that the company is “not party” to this matter and encourages those with questions to reach out to Mt. Gox or the DHS.

The Department of Homeland Security and U.S. District Court for the District of Maryland issued a ‘Seizure Warrant’ for the funds associated with Mutum Sigillium’s Dwolla account (a.k.a. Mt. Gox),” he said. “In light of the court order, procured by the Department of Homeland Security, Dwolla has ceased all account activities associated with Dwolla services for Mutum Sigillum while Dwolla’s holding partner transferred Mutum Sigillium’s balance, per the warrant.”

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Linden Lab changes terms of service prohibiting third-party trading of Linden Dollars

Update: Linden Lab changes its mind and allows third-party exchanges with some conditions. Details here.

The online world SecondLife comes with its own currency, Linden Dollars. A number of virtual currency exchanges make a significant portion of their income buying and selling Linden Dollars. Third party exchanging of Linden Dollars has been happening for years and is an important service particularly to SecondLife players outside the States who otherwise do not have a means of purchasing Linden Dollars.

Last week Linden Lab, the SecondLife operator, changed their terms of service to prohibit third-party trading of Linden Dollars.

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Dinero MPS a new mobile payment system for the world's under-banked

After the success of services such as M-Pesa, Kenya’s mobile-phone based money transfer service, it is clear that there is a large under banked population in the non-western world. A population that is quick to adopt low cost mobile based solutions.

Dinero-LogoA new mobile payment system, Dinero MPS, aims to offer a wide variety of mobile payment services starting with the unserved markets in Africa, South America and Asia. Founded by financial cryptographer Ian Grigg and entrepreneur Ken Griffith, Dinero’s Ricardian-Contract based system is set to launch later this year with the release of an Android phone app.

Dinero’s co-founder Ken Griffith shared with DGC insight on the businesses’ plans and motivations.

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50,000 more places to spend your Bitcoins

As Forbes’ Kashmir Hill demonstrated last week, the Bitcoin economy is small. Hill attempted to live on Bitcoin for a week going through coffee withdraw and losing 5lbs in the process. She should have waited a week.

gyft-logoGyft, a mobile gift card app, has announced that it will partner with BitPay to accept Bitcoin payments for gift cards.

This means you can use your bitcoins (although indirectly) to buy a whopper at Burger King, a bed to sleep in at Marriott, some new shoes from Nike and hundreds more. Gift cards purchased through Gyft can be spent at over 50,000 locations. However, the service is only available in the US. If you want to live on Bitcoin elsewhere better move to Berlin.

CFTC to regulate Bitcoin?

Bitcoiners, Bart Chilton is here to protect you. In a Monday interview on Bitcoin with the Financial Times the CFTC’s lead commissioner Bart said “It’s not monopoly money we’re talking about here – real people can have real risk in these instruments, and we need to ensure that we protect markets and consumers, even in what at first blush appear to be ‘out there’ transactions.”

Another regulator with their eye on the currency can only add to the headache that US based Bitcoin businesses are already experiencing as they try to sort through the implications of FinCEN’s recent guidance and deal with scared banks closing their accounts.

As Bitcoin is a global, non-political currency the obvious question is will heavy regulation simply move Bitcoin businesses off shore? This possibility isn’t lost on the Financial Times who discussed this with Bitcoin entrepreneur Roger Ver. The founder said that he knew of a few Bitcoin entrepreneurs who had moved to Panama to look into basing their businesses outside the US adding “Even if US regulations make it hard for Bitcoin businesses to operate in the US, that doesn’t mean it will make it difficult for people to use Bitcoin as a currency in the US. Bitcoin is a world currency,”

Chilton is head of the CFTC, that’s the Commodity Futures Trading Commission. As Bitcoin is not a traditional commodity one might not think of the CFTC as a Bitcoin regulator. However, the regulator has broad authority and certainly Mr. Chilton sees his organization as having authority. Reuters is reporting him as saying “Here’s what I know for sure: we could regulate it if we wanted. That is very clear,”

Arizona Governor vetoes gold and silver legal tender bill

Arizona bill SB 1439 passed the state legislature last month and would have allowed Arizona residents to use gold and silver with the same recognition as Federal Reserve notes starting in 2014.

However, Arizona Governor Jan Brewer vetoed the bill on Thursday.

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CoinLab files formal complaint in Federal Court against Mt. Gox

Last November Mt. Gox and CoinLab, a small US based Bitcoin exchange, entered into an agreement “to service the Bitcoin exchange market in a mutually beneficial manner”. According to CoinLab’s formal complaint, the agreement allowed CoinLab an exclusive license in North America to use Mt. Gox’s software in providing exchange services, in return CoinLab would provide the Japan based Mt. Gox with access to its US banking relationships.

CoinLab alleges that Mt. Gox failed to uphold their end of the bargain and is requesting damages for breach of contract.

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Ukash and MoneyGram Sign Money Transfer Deal

Ukash and MoneyGram have entered into a deal that will allow Ukash customer to send domestic and international money transfers via the Ukash website to any of MoneyGram’s 310,000+ worldwide locations.

The service will launch later this year in the UK with other locations to follow.

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