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While US considers how to regulate cryptocurrencies, another directive is putting the cat amongst the pigeons for Bitcoin businesses.
US Regulators and Bitcoin
bitcoin, news, US, banks, DOJ, FDIC, regulation
While US considers how to regulatecryptocurrencies, another directive is putting the cat amongst the pigeons forBitcoin businesses.
Last year, the US Department of Justice(DOJ) launched Operation Choke Point, a sting operation born out of a 2011document entitled ‘Managing Risks in Third-Party Payment ProcessorRelationships’ by Federal Deposit Insurance Corporation (FDIC).
The legislation effectively requires banksto submit details of all clients “potentiallyup to no good” and “If the governmentfinds something suspicious, it investigates further,” according to TheGuardian.
In real terms, banks face considerabledifficulties unless the accounts of “high-risk”users and business are shut down, and this is affecting all sorts of industriesfrom payday lenders to firearms to escorts and pornography.
While there can be no doubt that certainindividuals use such business models “as a front for less legal transactions,”The Guardian says, the knock-on effect of the operation targets the mostvulnerable sections of society, such as those reliant on payday advances.
The FDIC published a list of 30 “high risk merchant categories” whichwould be specifically targeted by the DOJ, but in addition, those acceptingBitcoin may well have cause to fear additional repercussions.
Recently, “Bitcoin businesses have had their accounts shutdown by major bankinginstitutions merely for their involvement in Bitcoin,” writes Jeff Berwickat The Dollar Vigilante, who cites the case of Internet Credit Union as a primeexample.
However, far from expelling such practices,the operation may well be drawing more businesses into Bitcoin in a bid to movetheir perceived “risk” away from the regulators.
Significantly, however, as Cryptocoinsnewsreports, Choke Point may well be extending its reach to the Bitcoin community. “Coinbaseand bitpay have both expressed their unwillingness to work with legal marijuanadistributors,” it reports as an example, “Bitcoin payment processors also feel the pressure from Operation ChokePoint.”
Should it turn out that aspects of thecryptocommunity succumb to the threats of regulators, the implications for theBitcoin ideal will be wide-reaching.
Meanwhile, reports The Guardian, the DOJsent a letter to Congressmen Blaine Luetkemeyer and Kevin Yoder in January “to reassure them that the Department ofJustice has “no interest in pursuing or discouraging lawful conduct.”
This was in response to a letter byCongressman Darrell Issa, Chairman of the House committee on oversight andgovernment reform, in which he accused the DOJ of “exercising prior restraint” and “unfairly targeting businesses such as payday lenders”.
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