Can the Feds really take your bitcoins away form you even if your transactions were legal?

[Neil Desmond]

According to this article, supposedly they can: http://finance.yahoo.com/news/even-t...155930135.html

Is it constitutional? It probably infringes on a big chunk of it.

One of the things that's brought up as an argument for it, in this article, is that it's based on the some principle that was supposedly used as an argument for taking property from its legal owners in other cases. For example, apparently there was some artwork that was stolen by Nazis, and people bought this artwork, but it was confiscated from them. Is it really the same principle? Could bitcoin as a case prove to be a counter-example to the legitimacy of confiscating artwork from its legal owner, even if it was stolen?

A recipient of a bitcoin cannot choose to only receive so-called "untainted" bitcoins; it wasn't set up like that, it wasn't intended to work that way, and users didn't intend for it to be used that way and probably don't want it to be changed to work that way, either.

Artwork is something that has qualities such as being unique and irreplaceable (these are qualities that contrast with something that serves as a medium of exchange). Cryptocurrencies, on the other hand, are nothing of the sort; confiscating bitcoins is like trying to confiscate time banking (http://en.wikipedia.org/wiki/Time_banking) from people (how would it even be possible to do something like that?) or cash; it's all the same kind of thing.

Even if bitcoins can be confiscated because they can be traced back to a transaction that they do not approve of and you agree that it ought to be recognized that way, the can still be replaced with "untainted" bitcoins and the person who initially used them after intentionally receiving them in an illegal way ought to be liable for the replacement of the confiscated bitcoins.

Are they being selective about who they victimize (i.e., by only confiscating them from the person who happens to be holding onto these "tainted" bitcoins at the time), or are they going after every single person who has had these "tainted" bitcoins go through their wallet? If not, then not only are people being victimized, but it's also totally selective and totally random.

I think there might be a double standard involved here; they want it to be "cash" (whatever that means) when it's convenient to be cash and not be "cash" when it's inconvenient to them for it to be cash.

Don't allow them to persuade you to accept false claims about what bitcoin is or isn't.

[kpitcher]

Fiat lovers must be starting to get really scared to get this story in businessweek full of Fear Uncertainty Doubt. They can't sieze a bitcoin unless they have access to the unencrypted wallet. Take your bitcoins away.. yeah, uh huh. Sure.

Also I don't buy the FBI owning even 5% of bitcoins. Last estimate from the Silk Road seizures was 1.5% on Forbes. (Which the servers had unencrypted or the FBI couldn't have transferred them). Now suddenly they got a few hundred thousand coins more? Sounds like more fear mongering.

[amonasro]

The story doesn't address fungibility, meaning if I give you a $5 bill that has a trace of cocaine on it, a court cannot link you to the illegal transaction by holding the bill. The same holds true of digital currencies. We simply hold the digital token at this place in time, we don't know or care where it's come from.

Also, with Bitcoin, the Feds can carry away your computer, hard drive, USB drive or what have you, but unless they have the private key (a simple string of letters and numbers) they can never move your funds. This is not Hollywood where the FBI gives the hard drive to a supernerd that can decrypt everything. Powerful encryption is unbreakable.

Best practices in the Bitcoin world dictate that your private key be encrypted, password protected, and backed up in multiple secure locations. Some even go as far to have their password in two different places (or brains) so both parties are needed to decrypt the key, like the dual key locks in movies where two people need to turn it simultaneously to access the vault.

[Czolgosz]

When you have the guns and the will you can write any law you like...and they will obey.

[muh_roads]

Being forced to give up your password and/or private keys will become a battle over whether it violates the 5th amendment or not.

[KCIndy]

When you have the guns and the will you can write any law you like...and they will obey.

Yep. Since when has the government let the Constitution get in the way when they want to go after something?

That being said...

I think the Feds will have a hell of a time trying to seize even a small fraction of the bitcoins out there. It's just too spread out. If BTC had built itself around some sort of "Central Bank" housed on a server somewhere, then yeah. But BTC is decentralized and peer-to-peer.

It's like the RIAA trying to shut down music sharing. They might be able to catch a few random users and give them a public flogging in order to "make an example" out of them. But shut down the entire network? Highly doubtful.