U.S. Government Turns Against Bitcoin

Given that Bitcoin first broke into mainstream attention when Gawker explained how to use it to buy drugs, perhaps the surprise is that it took federal regulators this long to take action against it.

In the wake of the Gawker story two years ago, Sen. Chuck Schumer (D-N.Y.) described Bitcoin as an "online form of money laundering" and called for the authorities to shutter the Bitcoin-based drug market Silk Road. Yet until recently, the feds have taken a relatively hands-off posture. Agencies have issued guidelines and signaled that they are monitoring the situation, but none have taken active steps to force Bitcoin intermediaries to comply with federal regulations.

That hands-off stance may have started to change this week when the feds took action against Mt. Gox, the world's leading Bitcoin exchange. Many people use Dwolla, a PayPal-like payment network, to send dollars to their Mt. Gox accounts. They then use those dollars to buy Bitcoins. On Tuesday, Dwolla announced that it had frozen Mt. Gox's account at the request of federal investigators. It's the first federal action against the currency.

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