Bitcoin Users Will Freak Out When They See The Cruise Missile The Justice Department Just Fired Against Another Digital Currency

Rob Wile | May 28, 2013, 4:31 PM | 16,889 |

Today, the Department of Justice arrested the founders of Liberty Reserve, a digital currency service, and charged them with money laundering. 

Created in 2006, Liberty Reserve was both a virtual currency — its denomination was called "LR's" — and an allegedly illict wire transfer service. According to DOJ's complaint, the scope of Liberty Reserve's operations was almost exclusively limited to criminal activity.

But as the FT's Stephen Foley Tweeted, the text of DOJ's complaint is a cruise missile across the bow of Bitcoin users:

Anyone valuing Bitcoin for its potential use as a black market currency needs to read DoJ suit v Liberty Reserve #theywillshutbitcoindown

— Stephen Foley (@stephenfoley) May 28, 2013

Here's the key language from the complaint (in bold):

Acting Assistant Attorney General Mythili Raman said: “As charged, Liberty Reserve operated, on an enormous scale, a digital currency system designed to provide cyber and other criminals with a way to launder their profits without leaving a trace. The company’s very purpose was to launder its users’ criminal proceeds through the U.S. and global financial system.

Secret Service Special Agent-in-Charge Steven G. Hughes said: “These arrests are an example of the Secret Service’s commitment to investigate and apprehend criminals engaged in the misuse of virtual currencies to conduct global monetary fraud. Cyber criminals should be reminded today that they are unable to hide behind the anonymity of the Internet to avoid regulated financial systems.

Until just a few months ago, Bitcoin was known as much for its facilitating illicit activity as its mathematical and philosophical underpinnings. Bitcoin exchanges offer the same kind of anonymity and trace-less transactions as Liberty Reserve, and its users praise it for its ability to circumvent regulated financial systems.

We already know the CFTC is interested in Bitcoin. If the government now has the above-mentioned types of "virtues" in its crosshairs, Bitcoin users should be pretty concerned.

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