Taking a Bite from Bitcoin Privacy

Mt. Gox, the largest bitcoin exchange in the world, is expanding its user verification procedure following increased scrutiny of virtual currencies by the U.S. government. Users must now be verified to withdraw or deposit any currency on the exchange.

Bitcoin is one of a growing number of virtual currencies, online currencies not backed or administered by a central bank. Units of the currency are created by solving complex mathematical problems. Transactions with bitcoin are seen as relatively anonymous, however regulators are seeking to erode this anonymity to prevent their use in illicit activity.

In March, the U.S. Treasury Department ruled that companies issuing or trading in virtual currencies must adhere to money-laundering rules that require detailed record keeping and reporting of transactions. Users are now required to submit a valid photo identification and proof of residency.

Tokyo-based Mt. Gox handles 80% of all bitcoin trading. The firm has said that it is prepared to adjust to new regulatory and compliance demands as the market for virtual currencies continues to develop.