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Ex-BlackRock MD: US raid on Bitcoin exchange is ‘hysterical’ reaction

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Recent moves by US authorities to freeze an account tied to the largest Bitcoin exchange has been slammed as a “hysterical reaction” by a Warwick Business School academic.

Earlier this week, the Department of Homeland Security secured a warrant to seize an account tied to Tokyo-based exchange Mt Gox, which says it handles 80 per cent of all trading in the fledgling digital currency.

The department alleges that the exchange and a subsidiary were conducting transactions “as part of an unlicensed money service business”. It claims Mt Gox failed to declare it was operating a currency trading business when it opened a bank account in May 2011.

Warwick Business School’s professor Jon Rushman, a former BlackRock managing director, says: “It is a little bit of a hysterical reaction from the US authorities.

“There are concerns of Bitcoin being used in illegal ways, but unless there is more substantial evidence of this I don’t think there is any reason to shut down the main Bitcoin exchange. US dollars, Russian rubles and euros have all been used by criminals, but nobody is suggesting their central banks should be closed down and their governors imprisoned.”

Bitcoin emerged four years ago and uses a complex mathematical construction to ensure that no more than 21m of them can ever be created. Only about half that amount has been created so far, with a market value of around $1bn.

Rushman calls for more “intelligent debate about Bitcoin and its future”. He also argues that the digital currency is “very attractive” as the fact its supply is limited means it offers a degree of inflation protection that the world’s central banks cannot guarantee.

“There has been interest in Bitcoin not just from technology enthusiasts but investors as well,” the professor says.

“It has been very volatile in price, which would put off a lot of investors, especially as you can’t see what is driving the price, ie what the market sentiment is behind it. People are still unsure in how much faith to place in it. It is not a huge market at the moment, but it is still at the experimental stage.

“The Bitcoin is testing our perceptions in so many ways and it is challenging regulators. It crosses and pushes boundaries and I would like to see a rational debate on how to use it in the future.”

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Readers' comments (1)

  • Why don't you get Jon Rushman to read the third paragraph of your article?

    The IRS investigating tea party groups is a hysterical reaction.

    mtgox not knowing what is going on and getting in trouble because of it is par for the course. This is all on mtgox.

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