Bitcoin Loses Dwolla Support; Feds Shut Down Silk Road (Oct. 15, 2013)
In the latest setback to the Bitcoin craze, Dwolla announced it will phase out all Bitcoin-related operations by the end of this month, citing “uncertainty and confusion” around the virtual currency. Bitcoin accounted for only 0.1 percent of its merchants, according to Dwolla, which specializes in P2P transactions. The move comes on the heels of the F.B.I. earlier this month shutting down the Silk Road Website, which backed Bitcoin transactions, after an undercover investigation revealed widespread illegal activity, according to a lawsuit authorities filed with U.S. District Court in New York. Several thousand drug dealers allegedly used Silk Road to distribute illegal drugs and services and launder funds since its launch in 2011, according to the lawsuit. U.S. agents seized approximately 26,000 Bitcoins worth about $3.6 million after discovering a package containing nine fake IDs traced to Ross William Ulbricht, Silk Road’s alleged founder.
Bitcoin’s value dropped to $100 from $140 last week, but observers say removing Silk Road from the Bitcoin market, which accounted for 4 percent of overall Bitcoin trade, could be a plus by eliminating the negative overhang from its alleged shadowy activities. Certain experts view Bitcoin as a potentially significant alternative for financial transactions. A U.S. judge in August recognized Bitcoin as a legitimate currency, and the Bitcoin Foundation is pushing for permission to allow Bitcoins as a source of federal political contributions.
Calgary, Alberta-based Bitcoin Ventures Inc. is still on track to launch its first product, CoinTap, which it describes as “The Bitcoin Gift Card.” The product, primed for Nov. 3 launch, is operating now in a closed pilot.