Mike Caldwell spent years turning digital currency into physical coins. That may sound like a paradox. But it’s true. He takes bitcoins — the world’s most popular digital currency — and then he mints them here in the physical world. If you added up all the bitcoins Caldwell has minted on behalf his customers, they would be worth about $82 million.
Basically, these physical bitcoins are novelty items. But by moving the digital currency into the physical realm, he also prevents hackers from stealing the stuff via an online attack. Or at least he did. His run as the premiere bitcoin minter may be at an end. Caldwell has been put on notice by the feds.
Just before Thanksgiving, he says, he received a letter from the Financial Crimes Enforcement Network, or FINCEN, the arm of the Treasury Department that dictates how the nation’s anti-money-laundering and financial crime regulations are interpreted. According to FINCEN, Caldwell needs to rethink his business. “They considered my activity to be money transmitting,” Caldwell says. And if you want to transmit money, you must first jump through a lot of state and federal regulatory hoops Caldwell hasn’t jumped through.
Because the process is so complicated, Caldwell has stopped taking orders for his popular Casascius bitcoins — which have become one of the most recognizable images of the thoroughly intangible digital currency.
Thursday, December 12, 2013
U.S. Government Shuts Down Bitcoin Mint
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but when are they going to look into this?........
ReplyDeleteBig Picture In Gold
From a regulatory point of view, the City of London is an entity unto itself, with a peculiar and special status, incorporated separately from greater London. It is the birthplace of the offshore banking industry and, as described by Nicholas Shaxson, author of Treasure Islands, the city “provides endless loopholes for U.S. financial corporations and many U.S. banking catastrophes can be traced substantially to those companies’ London Offices.” A July, 2010 Working Paper titled “The (sizable) Role of Rehypothecation in the Shadow Banking System” asserts that in the UK, an “unlimited amount of the customer’s assets can be rehypothecated and there are no customer protection rules.” (Rehypothecation occurs when the collateral posted by a prime brokerage client (e.g., hedge fund) to its prime broker is used as collateral also by the prime broker for its own purposes.) The London offices of AIG, JP Morgan, MF Global and others took advantage of the local “regulation lite” to fund off balance sheet ventures that would ultimately impair corporate and customer credit. It would be hard to imagine that the culture of the City did not extend to gold. In fact, the intersection of the shadow banking system and the pool of unallocated bullion does much to explain the proliferation of paper gold supply.
For the moment, the primary function of the paper gold market appears to be to enable macro hedge fund traders to express bets on the likelihood and timing of tapering the pace of quantitative easing. Made possible by lax oversight, weak accounting systems and otherwise dubious connections to underlying physical, the paper gold market offers substantial capacity for money flows wishing to take a stance on the expected shift in Fed policy. Unlike the physical gold market, which is not amenable to absorbing large capital flows, the paper market through nearly infinite rehypothecation is ideal for hyperactive trading activity, especially in conjunction with related bets on FX, equity indices, and interest rates.
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