Bitcoin, Banks & Billions: Regulatory and Compliance Implications of Bitcoin-Based Consumer Banking

Bloomberg BNA
18 minute read | November.19.2013

Earlier this year, the U.S. Attorney for the Southern District of New York, Preet Bharara, made headlines for bringing the largest online money laundering case ever.1 Over a span of seven years, Liberty Reserve—a Costa Rican company started by an American expat—allegedly laundered billions of dollars worldwide, including transactions involving 200,000 customers in the United States.2 Bharara, using the authority provided in Section 311 of the Patriot Act, seized Liberty Reserve’s domain name and restricted activities for 45 different Liberty Reserve accounts.

On Sept. 30, Bharara’s office took action against a second virtual commerce platform—Silk Road—which allegedly provided an anonymous platform to buy and sell drugs, forged documents, counterfeit currency, stolen identity documents, anonymous bank accounts, firearms, and even arrange contracts with hitmen.3 To ensure anonymity, Silk Road only permitted transactions in a new virtual currency known as “Bitcoin.”4 Before this civil forfeiture action and the arrest of Silk Road’s creator, Silk Road was estimated to have generated $1.2 billion in illicit sales and $80 million in commissions for its founder—all in untraceable, electronic Bitcoins.5

Originally published in BNA's Banking Report, reprinted with permission.