Quote from: njloof on June 10, 2011, 05:53:25 PM

BTCLaw: any thoughts on how to avoid having Bitcoin suffer eGold's fate? Many of these online currency approaches fail for internal reasons (see: hashcash), but it looks like eGold became a victim of its success, particularly in its use for money laundering.

First let me say I'm biased, as I would love to be involved as a principal in any serious, well-funded effort to create a legitimate money service business and/or bank startup to exchange bitcoins for currency.

Yes, we need more exchanges. We need at least one exchange built on a rock-solid foundation of strict legal compliance. Run like any other financial institution. No dirty business. No dirty money. A full-time legal compliance staff. This means at least one person in who can act as a legal liaison to contracted legal counsel and later head of legal compliance.

The federal prosecutors got e-gold by going after the exchanges, which were not compliant with applicable Banking Secrecy laws. People were using the exchanges to get clean cash from criminal enterprises, and not only did they fail to stop it or discourage it adequately, but they seemed to be entirely aware of it, even encouraging it. In otherwords, e-gold's central depository and its unaffiliated exchanges were knowingly and intentionally operating as a money laundering business.

Mtgox is great for being the first. We are where we are because of him and his company. He is taking a great risk. I mean, it was just months ago that he put a post up on this forum announcing his exchange is open for business, and now they have volume of $1million per day. I'm sure it is overwhelming and I wish Mtgox and his company all the best.

But for mtgox to stand the test of time, they need to stand up to the pressure of rapid expansion, especially on the legal end, and start forming major formal relationships with banking institutions, currency exchanges, and at least one good international law firm. The future of bitcoin should not rest on mtgox's shoulder's, the burden is heavy enough as it is.

From the wikipedia article on e-gold, but consistent with news reports I remember reading at the time:
"The essence of the allegations in the indictment is twofold: (1) e-gold is an unlicensed money transmitting entity as defined by United States Code;[16] and (2) e-gold was a de facto means of moving money from illegal activities to wit: high-yield investment programs which are Ponzi scams, credit card and identity fraud sites and retailers of child pornography.
The indictment alleges that the defendants knew of illegal activity associated with accounts and recorded it in the e-gold database with notations such as "child porn", "scammer", and "CC fraud".[17] Additionally, it alleges that while e-gold placed "value limits" on certain accounts suspected of criminal activity, they suggested that the owner open a new account, placing no restrictions on their ability to move funds out of the original account.[18]"