Homeland Security Investigations, connected to US Immigration and Customs Enforcement has requested a freeze on Mt Gox’s account – which is the primary Bitcoin exchange. The virtual currency is alleged to be an easy money-laundering channel for the drug trade. Volatility in Bitcoin’s value over the past few months has brought the virtual currency it into the bright lights of the US government scrutiny.
Bitcoin’s decentralized network is thought to prevent governments from monitoring activity and blocking transactions but this may put that theory to it’s first real test.
Jerry Brito, a scholar at the libertarian Mercatus Center at George Mason University, urges federal regulators to tread lightly. “Bitcoin has the potential to be a boon to the economy and a boon to merchants,” he argues. He believes it could “disrupt traditional payment networks that have not been innovative for a very long time,” reducing the costs of financial services.
Brito also suggests heavy-handed government interference could drive the currency users underground, making it unavailable to legitimate users.
Image: By zcopley CC BY-SA 2.0