Online currencies: Will e-gold’s competitors abandon the U.S. market?
The Industry Standard: Is money laundering a problem for e-gold, as portrayed by U.S. prosecutors?
Mark Herpel: Not anymore! Seriously, money laundering is a big problem for all financial industries and ours is no different. For more than a decade the business has been unregulated, or, as some claim “self-regulated.” It’s truthful to say that some DGCs [digital gold currencies] have seen more than the usual amount of fraud and financial crimes, but this [state of affairs] is quickly changing for the better.
There is a new report out by the U.S. Department of Justice entitled “Money Laundering in Digital Currency” which we are discussing in this next issue of DGCmagazine. The report highlights several very specific problem areas across the digital currency spectrum where improvements could be made. It also states the obvious in the last paragraph — “U.S. regulatory action alone will not be sufficient to suppress the money laundering threat posed by digital currencies.” Consequently, it’s also obvious from that report what the government does not know about digital currency systems.
The Standard: How will the new steps e-gold is taking impact the service, and its reputation among e-gold members?
Herpel: The new beginning as outlined by Dr. Jackson should save the local DGC industry in the United States by regulating it, controlling the participants and generally turning e-gold into something like “GoldPal” a highly controlled and monitored Web business.
It’s good to see but as anyone knows, PayPal is widely misused and hacked, so even with strict PayPal-type U.S. regulations some fraudsters are still bound to misuse any online payment system.
Let me make one thing perfectly clear: The e-gold business survived, it’s a better Internet model than anything else out there in the U.S., and should flourish. This change is a very good thing for U.S. users. The U.S. needs an easy-to-use precious metals Web site where the average Joe can easily buy gold and have a store of value — away from low-interest banks and IndyMac-type situations.
e-gold should be a big hit in about six months and we are all pleased to see the business has survived this massive government action. We all also pray that none of the e-gold defendants will have to serve any jail time.
The Standard: How will e-gold’s competitors react?
Herpel: I suspect all DGCs will either get the licensing requirements as a money transmitter in the states where they have customers, or simply drop all U.S. [customers] and block U.S. IP [addresses], similar to the situation which has developed from the [Unlawful Internet Gambling Enforcement Act of 2006].
None of e-gold’s competition [is] located in the United States. The Judge in this e-gold case wrote a very specific opinion that the DGC business e-gold conducted was considered money transmitting, so all other businesses similar to this will fall under the same spotlight. Today, tomorrow, next month . . . I don’t know exactly when but soon.
So for all users and operators outside of the U.S., this case does not bring with it any big changes. So the ‘true’ value of this successful prosecution remains within U.S. borders and within the e-gold system.
Comment by Teodor Muntean on 29 July 2008:
Great news and I’d like to have a link to it from my site, but you don’t have DIGG bookmark site here, as I can’t do it automatically through Digg. However I have bookmarked your article in different places. Thanks, Teodor
Comment by Oluniyi David Ajao on 31 July 2008:
I don’t see e-gold doing a rebound anytime soon. Many users have fled already. Of what use is e-gold without its users?
Comment by Mark on 31 July 2008:
Not soon because the majority of past users, the ponzi crowd and pay-per-scams won’t be able to use the new GoldPal. Too much PayPal type verification, however, in 6 months the US is likely to be in much more financial hot water over the credit and spending crisis. Remember what happens in just under 3 months? A new president will be elected (Obama we hope) and all those hidden bills, debts and problems the Bush administration has swept under the rug, these will all be appearing and hitting the bottom line. If the economy turns more southward, and it looks that way, the doing business online backed by gold and having an online savings account in gold and not dollars will be very attractive for about 300 million Americans I know. Based on that thesis, I think e-gold has a very bright future. As far as them staying open, my wilder than wild guess would be that the plea agreement included some paragraphs on “full cooperation on future criminal cases” arising from e-gold’s history. That may have been a lynchpin in the deal to keep the company going, but that’s a really wild guess. In other words I don’t see them closing, but growing in a verified, regulated way. Remember they have the best system available on the Internet, it beats competitors like PayPal hands down, e-gold rocks so given the choice next year, dollars or gold, who do you think Net consumers might look at closely?
Mark
Comment by goldviper on 2 August 2008:
During a economic or political crisis, the actual holding of physical coin or bullion, or anything that the market considers valuable. Cigarettes, tea, new ideas, or special abilities, will enable you to survive. Special abilities particularly in energy generation, medicine, food and animal production, and weapons/self-defense.
Comment by jeffrey on 15 September 2008:
Best system available on the internet huh? Then why don’t you see it offered as a payment system alongside paypal? As far as the most functional online currency vendor with the emphasis on transaction facilitation, it doesn’t come close to paypal.
But in terms of an online currency that is immune to the economic and inflationary pressures of any one country, then I can see your point.
I also don’t agree with the last sentence of this article italicized.
“So for all users and operators outside of the U.S., this case does not bring with it any big changes. So the ‘true’ value of this successful prosecution remains within U.S. borders and within the e-gold system.”
Huh? It does bring a big change in that the operators of its competitors outside of the US face imminent seizure and prosecution upon entry into sovereign lands under US jurisdiction, much like the online gambling operators of yore that setup shop in places like Antigua were on flight layovers that happened to be in US airports.
Comment by Mark on 15 September 2008:
Jeffrey, my apology I should have said, in my humble opinion the best system on the Internet. However, I consider PayPal to be a jazzed up payment processor which processes credit card transactions and chargebacks.
They are the most popular in this credit card world but IMHO their system is not even close to the easy commerce low fee applications we can get from e-gold. I suppose we will have to give it time and perhaps one day soon they will operate side by side?
The final sentence meaning may have been misunderstood or misstated. If you are a non US person outside of the US, you have an abundant choice of Non US digital currency to use in e-gold’s absence. Your business does not fail because e-gold went down you can switch to Pecunix, Webmoney or others. Also if you are an Non operator and pull out of the US market, you still stay in business. Operators in this industry should know by now that the US is requiring licensing and cracking down. Yes, ALL of these businesses face seizure, prosecution and lose of their freedom if they continue to operate in a hostile US market.(just ask James Fayed of e-bullion) It’s a shit way to move forward on the gov’s part, but this is no secret now, everyone must realize they are taking that risk in a US market so pulling out of the US and continuing their business on a global scale would be smart. In my opinion, if a company does that and continues their successful business operation, the e-gold prosecution would not effect that continuing global biz.
Thank you for your comments.
Mark