War on Bitcoin: US Government Seizes Assets of Mt Gox

The US government has officially launched a campaign against bitcoin by seizing accounts tied to one of the largest bitcoin exchange.

From the Wall Street Journal:

WASHINGTON—U.S. officials dealt a blow to the fledgling digital currency called bitcoin, freezing an account that is tied to the largest bitcoin exchange just months after regulators warned that such entities should follow traditional rules on money laundering.

The authorities obtained a warrant Tuesday to seize an account of a subsidiary of Mt. Gox held at the online payments firm Dwolla, according to a copy of the warrant provided by the Department of Homeland Security on Wednesday. The department declined to comment further on the matter.

The scrutiny from law enforcement comes after the Treasury Department ruled in March that the same money-laundering rules that apply to traditional money-order providers, such as Western Union Co., WU +0.98% would also be applied to firms that issue or exchange online cash, including currencies not backed by a central bank.

Bitcoins are supposedly decentralized. So technically speaking the US government cannot directly strike at bitcoin without taking on the internet itself. Thus the US government’s campaign against bitcoin has been channeled through the financing facilities of the trading platforms and not bitcoin itself. 

But so far, other exchanges as US-based competitors Seattle-based CoinLab and San Francisco-based Coinbase or bitcoin exchanges registered with the Treasury Department has not been subjected to the same harassment. On the other hand, the Mt. Gox case should benefit them.

The US government wants bitcoin dealers to operate under their umbrella and has assailed or harassed those operating outside their ambit.

In short, the governments will work on controlling cryptocurrencies covering all variants; aside from Bitcoin: Litecoin, PPcoin, Freicoin, Solidcoin, BBQcoin, Fairbrix, Geistgeld among the many more.

Besides, it may come as a coincidence but the Mt. Gox crackdown comes in the light of the second wave of selling pressure on gold prices. Gold fell 2.34% last night to close below the psychological $1,400 threshold level.

Remember that the Wall Street initiated flash crash in gold came alongside the crash in bitcoin prices during mid April. (chart from stockcharts.com and bitcoincharts.com)

The current actions against Mt.Gox’s bitcoin platform has so far unaffected prices of bitcoins.

The crux is--bitcoins and gold appear to be simultaneously under political pressure as expressed through prices or through direct government intervention

Yet look at the irony with the following headline: US Stocks Rise on Stimulus bets as Manufacturing Falls.

This means more bad news is good news; which also implies that stocks have been totally dependent on steroids, thus the parallel universe: stagnant economies yet surging stocks on steroids.

This also impresses on the public that the connection between gold and government steroids have become detached. People are being made to believe that gold have lost its “inflation hedge” function. (Although in the real world this hasn’t been true: Just take a look at the seminal hyperinflation phase in Argentina where the average citizens flee to gold and bitcoins as refuge)

What else am I saying? Well, governments simply hates competition. So currency alternatives as gold and bitcoins are not just being manipulated, they are being attacked.

All financial markets are being manipulated, but at different degrees. Assets that benefits the political objectives of governments such as stocks, bonds and the property sector are being subsidized (directly and indirectly) whereas those opposed such as short sellers, commodities and bitcoins are being marginalized. 

But the real economy, which allegedly has been the target of all these assistance, has been ignoring them.  

And yet the real objective behind all these has been to save or preserve the cartel of the political institutions of the banking system-central bank-welfare/warfare state. Remember rising asset prices buoy the balance sheets of insolvent banks and governments, thereby the cumulative inflationist policies.

Thus the parallel universe or the huge detachment between the real economy and prices of financial assets.

All these are really signs of bubble blowing activities everywhere and of how terribly desperate governments have become. 

Yet all failed government actions would translate to deeper confiscations of people's savings by governments. Hence, governments are working around the clock to close all possible loopholes as seen by the attack on Mt. Gox or from the Indian government's ban on gold imports.