The United States House Appropriations Subcommittee on Commerce, Justice, Science, and Related Agencies 2014 appropriations bill recommends spending amounts for a number of government agencies including the FBI.
In their 2014 appropriations bill, the subcommittee directs the FBI to report on Bitcoin, specifically what the FBI is doing to address the “challenge” that they see from the “ersatz currency“.
Page 45 of the bill…
Money laundering. —The Committee understands that Bitcoins and other forms of peer-to-peer digital currency are a potential means for criminal, terrorist or other illegal organizations and individuals to illegally launder and transfer money. News reports indicate that Bitcoins may have been used to help finance the flight and activity of fugitives. The Committee directs the FBI, in consultation with the Department and other Federal partners, to provide a briefing no later 120 days after the enactment of this Act on the nature and scale of the risk posed by such ersatz currency, both in financing illegal enterprises and in undermining financial institutions. The briefing should describe the FBI efforts in the context of a coordinated Federal response to this challenge, and identify staffing and other resources devoted to this effort.
One of the more worrying aspects of the Liberty Reserve takedown was the constant insistence by US authorities that Liberty Reserve was only a money laundering service with no legitimate use.
Regulators were very concerned with LR’s anonymity which was a serious draw to the service for many people. But what was likely an even bigger factor in LR’s success was its irreversible payments. This is a very important feature for businesses that are at risk of payment fraud or chargebacks, and it’s a feature that is not available in the current regulated financial system.
In the case of Liberty Reserve, It’s not the individual infractions committed by clients of Liberty Reserve that are worrisome to the regulators, it’s the fact that a semi-reliable platform for private payments existed in the first place.
Liberty Reserve provided a service that had a true market demand from legitimate business sectors and from non-criminals, notwithstanding the government’s claim that “virtually all” its business was illicit. If banks and traditional financial institutions still respected basic client privacy and facilitated some form of digital payments that did not always involve harmful reversibility to the merchants, then companies like Liberty Reserve wouldn’t even be necessary.
Would Hayek have been a fan of Bitcoin? Could ‘key disclosure’ be used to confiscate Bitcoins? Will we some day have gold backed Bitcoins?
A few interesting thoughts and links as a follow up to my last post on Bitcoin.
BitPay passes 1,000 merchants, more Romeny/Bitcoin drama, the poor ‘opting out’ of banking, Spanish gold and hyperinflation.