US vs Bitcoin Revolution | Plan B 19

US vs Bitcoin Revolution | Plan B 19

An organized effort is underway at multiple levels of the US government to investigate, understand, regulate and potentially domesticate Bitcoin. We dig through the details and ponder the future.

Plus the ASIC challenge, the Electrum server outage, and a PSA for Android users.


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Every Important Person In Bitcoin Just Got Subpoenaed By New York\’s Financial Regulator

An official told the Associated Press that 22 subpoenas have been issued in all, seeking information on such topics as what measures Bitcoin companies may have taken to prevent money laundering, and what kind of consumer protections might be available for Bitcoin investors.

\”If virtual currencies remain a virtual Wild West for narcotraffickers and other criminals, that would not only threaten our country\’s national security, but also the very existence of the virtual currency industry as a legitimate business enterprise,\” Benjamin Lawsky, who heads the New York Department of Financial Services, said in a memo accompanying the subpoenas on Monday.

The New York State Department of Financial Services is stepping into the sheriff\’s boots.

\”We believe that — for a number of reasons — putting in place appropriate regulatory safeguards for virtual currencies will be beneficial to the long-term strength of the virtual currency industry,\” said NYSDFS superintendent Benjamin Lawsky in a statement.

List of companies subpoenaed by the New York State Department of Financial Services

  • BitInstant
  • BitPay
  • Coinabul
  • Coinbase Inc.
  • CoinLab
  • Coinsetter
  • Dwolla
  • eCoin Cashier
  • Payward, Inc.
  • TrustCash Holdings Inc.
  • ZipZap
  • Butterfly Labs
  • Andreesen Horowitz
  • Bitcoin Opportunity Fund
  • Boost VC Bitcoin Fund
  • Founders Fund
  • Google Ventures
  • Lightspeed Venture Partners
  • Tribeca Venture Partners
  • Tropos Funds
  • Union Square Ventures
  • Winklevoss Capital Management

Congress appropriations bill directs FBI to launch a federal investigation of Bitcoin as potential means for criminal, terrorist or other illegal activities

A Senate committee is pressing federal regulators and law enforcement officials to explain how they plan to oversee Bitcoin and other virtual currencies as the issue gains increasing attention from government officials concerned about the role these new markets will play in the future.

The Senate Homeland Security and Government Affairs Committee on Monday sent letters to several agencies requesting that they disclose their virtual currency policies, how they developed them, how agencies are coordinating and finally what they plan to do going forward.

  • From the bill (page 45):

Money laundering.–The Committee understands that Bitcoins and other forms of peer-to-peer digital currency are a potential means for criminal, terrorist or other illegal organizations and individuals to illegally launder and transfer money. News reports indicate that Bitcoins may have been used to help finance the flight and activity of fugitives. The Committee directs the FBI, in consultation with the Department and other Federal partners, to provide a briefing no later 120 days after the enactment of this Act on the nature and scale of the risk posed by such ersatz currency, both in financing illegal enterprises and in undermining financial institutions. The briefing should describe the FBI efforts in the context of a coordinated Federal response to this challenge, and identify staffing and other resources devoted to this effort.

The Journalistic Source Protection Defence Fund (JSPD) was set up on August 9 with the goal to provide legal as well as campaign aid to journalistic sources. Snowden, who is behind the biggest intelligence leak in the history of the US National Security Agency (NSA), has been selected the first such source.

Android Security Flaw Puts Bitcoin Wallets at Risk

SecureRandom is a Java class that generates cryptographically strong random numbers. In order to remain secure the random numbers used to generate private keys must be nondeterministic, meaning that the output of the generator cannot be predicted. Mike Hearn stated in an email to bitcoin developers regarding the Secure Random class on android, \”Android phones/tablets are weak and some signatures have been observed to have colliding R values, allowing the private key to be solved and money to be stolen.\” Bitcoin uses a random number in transaction signatures and if the same random number is reused the private key of the wallet can be determined.

Before the announcement was made, users on the forums had noticed over 55 BTC were stolen a few hours after the client improperly signed a transaction using the compromised random number generator. Users observed SecureRandom re-using the same random numbers for multiple transactions, thus compromising the private keys.

There are two types of mobile wallets, those where the private keys are generated locally on the phone, and those where private keys are held by a private company. Android wallet apps where keys are generated on the device include: Bitcoin Wallet, BitcoinSpinner, Mycellium Wallet, and has already repaired the vulnerability, Bitcoin Wallet has an update in beta testing, and fixes for BitcoinSpinner and Mycellium are currently in development.

The announcement on identified a three step process to secure existing addresses on all other apps:

  1. Generate a new address on a secure random number generator.
  2. Transfer all existing bitcoins to the new address. Do not send any bitcoins from this address using an Android device until the updates are implemented
  3. Notify any users of your old address of the change, so that the compromised address does not receive any more bitcoins.

Bitcoin Pick

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