The Liberty Reserve website has been unable to open, the Bitcoin system is more difficult to be destroyed

The online Payment service Liberty Reserve was closed over the weekend for financial crimes involving money-laundering, according to a Tuesday edition of Forbes magazine online. This situation should arouse the concern of Bitcoin users. But the bitcoin system as a whole is more difficult to destroy than the Liberty Reserve, a service with a clear founder.

The Liberty Reserve website is now unable to open

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Last weekend, the most blockbuster news in the online payment industry was the closure of the Liberty Reserve. Liberty Reserve provides virtual currency "LR yuan", which is accused of providing services for information offenders, used for money laundering, and the purchase of contraband such as drugs, child pornography, stolen identity information and hacking services. The federal prosecutor in Manhattan said the Liberty Reserve "deliberately attracts and maintains a user base of criminals to help them carry out their financial activities anonymously and untraceable in their systems". The Liberty reserve charges a lower fee for each transaction and provides a "privacy fee" option to make it impossible for the payee to be informed of the source of the funds received.

The US government's efforts to crack down on anonymous online payments will draw attention to the Bitcoin community, suggesting that the U.S. government is paying close attention to how the virtual currency is used. Tim Lee, The Washington Post reporter, Tim Li Hu that the U.S. government's description of Liberty Reserve can also be applied to Bitcoin.

The U.S. government aimed at the founder of Liberty Reserve Asser Budovsky (Arthur Budovsky) and Fradmir Katz (Vladimir kates). This is not the first time they have been involved in a legal dispute. They were both accused of operating a capital trading company, Gold age, in the apartment in Brooklyn, New York, in 2006. The charges they received were similar to those of the time when they operated unauthorised money-trading operations to help launder money. But the money involved is even bigger. The Gold age involved a involving of only 30 million dollars, and the US government sought to detain liberty for more than $6 billion trillion in assets.

Liberty Reserve has more than 1 million users, of whom more than 200,000 are in the US, but the company has not registered with the US Treasury for the "Money services business". This is also the Bitcoin trading service Mt. Gox in recent years. The U.S. government says the Liberty reserve has been very lax in its efforts to prevent money-laundering. Despite a special anti-money-laundering column on the company's website, the US government believes it has taken little action to prevent or monitor suspicious transactions.

"Users usually open accounts under pseudonyms, including names that are blatantly illegal, such as ' Russian hackers ' and ' hacker accounts '," a statement issued by the Manhattan federal prosecutor's office said. As part of the investigation, the law enforcement department opened an account named ' Joe Bogus ' in Liberty Reserve, the address of ' New York State completely fictitious city 123 Fake Street ' and traded. ”

Some of the LR's holders are legitimate businesses, according to BBC News. In an interview, the CEO of a virtual credit card company expressed concern about the fate of the company's 28,000 dollar assets stored in the Liberty Reserve System. So what should you do if you're a fan of virtual money but don't want your money to be sucked into the U.S. government investigation?

First you need to verify that the virtual currency service you are using is registered with the U.S. Treasury. If the service is not registered as a "financial services business", it is likely to encounter problems in the US government's action against the digital currency.

"These arrests show that U.S. Secret Service is committed to investigating and arresting criminals who misuse virtual currencies and engage in global financial fraud," said Steve Hughs, director of Secret Service Stephen Houss, in an official statement on the charges and arrests. Information offenders should know that they cannot hide behind the anonymity of the Internet and bypass the regulated financial system. ”

Bitcoin trading services, such as Mt. Gox has been regulated. But Tim Li Hu points out that the Bitcoin system is hard to crack as a whole. On the one hand, Bitcoin has no founder. This is a non centralized system, with many "miners" worldwide. While the US government can crack down on individual trading services, the Bitcoin system is huge and has many nodes.

"If the former users of Liberty Reserve switch to Bitcoin, then the federal regulator will be in trouble," says Tim Li Hu. This encrypted currency is not very well suited to the current anti-money-laundering laws, and it is not possible to ask someone to make the system compliant. It is not feasible to turn off the bitcoin system. The U.S. government can make it harder for users to use Bitcoin, but it's hard to destroy the entire network. ”

Bitcoin is now the darling of Silicon Valley, where tens of millions of dollars have been invested in services such as Coinbase, BitPay and BitInstant over the past one months. But businesses and investors should keep in mind that Bitcoin is also causing concern in the US government.