The Department of Homeland Security Seizes Bitcoin Accounts, How Far Will They Go?

The Department of Homeland Security obtained a warrant from the state of Maryland to seize accounts associated with bitcoin. Dwolla, the company hosting accounts associated with the seize, is a money transfer company. Many individuals hoping to buy bitcoin purchase it through Dwolla on Japan's Mt. Gox exchange, the exchange that handles most bitcoin transactions. The accounts were frozen after the Treasury Department ruled in March that firms engaging in the transfer of online currencies not backed by a central bank need to follow the same money laundering rules as traditional currency, according to the Wall Street Journal. The Mt. Gox accounts hosted on Dwolla did not register as a money transferring service. Although the United States cannot directly pursue the Japanese exchange, the United States subsidiary is the closest it can get. This is the first time the government has attacked the currency for illegal operations, raising questions as to the extent the government can and will pursue other bitcoin accounts. Senator Charles Schumer of New York has described bitcoin as a, “form of money laundering” and further attacked its function of purchasing drugs. In a letter he and Senator Joe Manchin wrote to the the Attorney General and Drug Enforcement Agency, they emphasized the dangers the currency poses when used to purchase illegal drugs online. bitcoin is often used for these illicit purchases as the identity of the holder is not tracked by a government. Bitcoin is currently trading on the Mt. Gox exchange at $114.49.