Increasing Scrutiny

Bitcoin’s main benefits of decentralization and transaction anonymity have also made it a favored currency for a host of illegal activities including money laundering, drug peddling, smuggling and weapons procurement.

This has attracted the attention of powerful regulatory and other government agencies such as the Financial Crimes Enforcement Network (FinCEN), the SEC, and even the FBI and Department of Homeland Security (DHS).

In March 2013, FinCEN issued rules that defined virtual currency exchanges and administrators as money service businesses, bringing them within the ambit of government regulation.9 In May that year, the DHS froze an account of Mt.

Gox – the largest Bitcoin exchange – that was held at Wells Fargo, alleging that it broke anti-money laundering laws.10 11 And in August, New York’s Department of Financial Services issued subpoenas to 22 emerging payment companies, many of which handled Bitcoin, asking about their measures to prevent money laundering and ensure consumer protection.