While, as we reported yesterday, the Federal Advisory Council (FAC) and Federal Reserve seem to have some positive things to say about Bitcoin, other branches of the government apparently hold a different opinion. While the FAC understands that Bitcoin's use in illegal activity is no different than how cash or other forms of currency, the Federal Bureau of Investigations (FBI) are looking into several Bitcoin exchanges for an alleged connection to the now defunct Silk Road underground trading forum.
According to the Wall Street Journal, the FBI and federal prosecutors are investigating the now liquidated Mt. Gox and other exchanges, as well as other Bitcoin-related businesses for a possible link to illegal activity on the Silk Road.
While the anonymous source says that the investigation is still early and no connection has been confirmed in the minds of the authorities, several Bitcoin companies reportedly received subpoenas from the federal government this past winter. Besides Mt. Gox, it is not known which Bitcoin companies have been contacted by federal authorities.
Unfortunately, the investigations sound similar to the charges brought against BitInstant founder Charles Shrem for money laundering. In that case, federal prosecutors argue that Shrem helped funnel money into the Silk Road while knowing it was going to be used for illegal means.
Many in the Bitcoin community question the validity of the federal case, saying that by allowing people to exchange dollars for Bitcoin, Shrem was only providing the service his company is designed to provide and couldn't know what the digital currency was going to be used for any more than a bank knows what someone plans to do with money withdrawn from their account. Shrem and his co-defendant have pleaded not guilty.
If the Wall Street Journal is accurate, we could see more cases where Bitcoin exchange owners are somehow held responsible for the deeds of anyone who uses their service. And that will not encourage the possible jobs “boom” that the FAC sees in Bitcoin.