22 Jul 2008

E-Gold Indictment: No Longer a Farce

Several months ago I wrote about the legal problems facing electronic ‘alternative currencies’ and the shuttering of one particularly sketchy operation – e-gold-based ‘meta-currency’ 1MDC.

Now it seems that the owners of E-Gold are facing stiff fines and possible prison time after pleading guilty to conspiracy to engage in money laundering and operating an unlicensed money-transmitting business, an indictment E-Gold’s founder once called “a farce.”

Basically, the Feds really didn’t like the core strength of E-Gold, which was that it provided a way to anonymously transfer funds without any sort of user verification. E-Gold didn’t make you prove who you were, and thus there wasn’t any prohibition on how many accounts you could have, which meant that there wasn’t a way to really bar someone from using the service – close down one account, and they could just open up a new one.

Unsurprisingly, the plea agreement includes a “comprehensive money-laundering-detection program that will require verified customer identification” – in short, an end to anonymous transfers.

Although E-Gold never amounted to much in the world of legitimate commerce, and it probably would be little missed by most people if it disappeared completely as a result of the changes, it’s unfortunate and sad to see yet another early-Internet dream – that of anonymous, untraceable electronic currency, immune to the whims of national law or taxation – go (dare I say it) down the tubes.

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