Last week we highlighted an article about the use of the Patriot Act by the FBI/CIA/other three letter acronym agencies funded by the US taxpayers and how it can be used to do just about anything.  Seriously, whatever the government wants, they can find a way to get it with the Patriot Act.  From financial transaction reports to the most minute details about a person with money in an account that touches US based financial services, they have the means and have perfected the methods.

We also mentioned Bitcoin a few months ago in another highlighted article, and really, not much has changed with the setup or implementation of the virtual currency.  People are still getting ripped off by these unregulated, unlicensed ‘exchanges’; the value is as volatile and arbitrary as that of the most expensive heroin on the planet, and people like the FBI have figured out how to seize someone’s Bitcoins, even if they haven’t completely figured out to access them as forfeiture.

The US Senate met this week and Bitcoin was on the agenda, and while a few senators preferred to take the dunce cap method of not answering how the government might treat the situation, other agencies were not as quick to claim ignorance or innocence in the matter.

Treasury say it’s not their job, since it’s not fiat currency backed by the US.  Securities and Exchange say it’s not their job until it’s deemed a security product.  And so on, each department claiming no jurisdiction or relationship with Bitcoin or its issuers and exchangers.

However, in the system that the US has operated under since 9/11, these answers don’t really add up, to, well, anything.  The Patriot Act provisions mean that financial transactions in the US (or that occur with US based institutions) over a certain amount ($500 per day or $5000 lifetime withdrawal value) must have the documentation on file that identifies both parties in the transaction.  And the identification required includes copies of government issued ID, SSN or EIN (for US entities), proof of physical address, and so on.

Nowhere does Bitcoin offer compliance with the Patriot Act, and there doesn’t seem to be any evidence of any of the exchanges being the least bit compliant either, so technically Bitcoin is a problem in the US.  It’s not been labelled specifically illegal, and it probably won’t.  There’s every reason NOT to label it that way, and every opportunity to use convoluted and open to interpretation rules and laws to bend the Bitcoin users and exchanges to the will of the US government, quietly, without fanfare and possibly escaping notice by the population at large.

Further, by keeping a low profile where Bitcoin (and any other ‘virtual’ currency that may arise due to the success of Bitcoin) is concerned, the government turns itself into a sort of cyberstalker – akin to a patent troll who keeps mum about his filings so that he can wait until others are too far in with their ventures to do anything besides pay the licensing fee to go about their business.   One could almost say that Bitcoin is like a bait and switch for the media; when the Senate claims to have no clue how to manage Bitcoin and the appropriate agencies keep quiet, that would certainly tend to entice the lower level, less aware money launderer into using Bitcoin as a method of accounting.  After all, it worked so well for Dread Pirate Roberts (possibly aka Ross Ulbricht), owner of Silk Road, that he’s gone back into business yet again, barely a month after his first major run in with law enforcement but in what certainly won’t be his last.

Is it fair for the US government to entice people into using Bitcoin so that they can reach a critical number and then use the Patriot Act to punish them for contravening US law?  Probably not ethical but it certainly seems likely to occur.