Bitcoin Foundation comes under fire in California

Government authorities increasingly view digital currencies, namely Bitcoin, as a means for people to evade tax.

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So it should come as no surprise that Bitcoin operators and organizations have come under scrutiny.

The Bitcoin Foundation today revealed it has received a cease-and-desist letter from the California Department of Financial Institutions. The Foundation, which claims to have an international membership, was charged with engaging in the business of money transmission without a proper license.

Forbes contributor Jon Matonis reported the news and disclosed in his bio that he works for the Foundation.

Matonis said that penalties could be as severe as $1,000 to $2,500 per violation per day and may include criminal prosecution. He indicates the letter has come as a shock, given that the Foundation advocates for the Bitcoin community and does not conduct or perform any financial transactions.

However, there may be more to the story, given that the author holds a clear bias. “Freedom of choice in currencies is probably the most important free speech issue of our time,” Matonis writes.

According to Matonis, it may be a blanket action, and other Bitcoin-related entities may expect to receive similar letters in the coming weeks.

Bitcoin is an independent currency that can be traded anonymously, and has traditionally been popular with privacy enthusiasts, libertarians, and hipsters. As Bloomberg reports, it’s growing only slowly — but the very notion is “an existential threat to the modern liberal state.”

Digital currencies have made the headlines in recent months for a variety of reasons. Bitcoin companies fueled the hype by holding a conference in San Jose, Calif. in May. Angel investors, sensing a money-making opportunity, raised a $6.7 million fund for Bitcoin startups.

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But the public’s confidence was shaken with the news that digital currency Liberty Reserve would be shut down and its founder arrested, allegedly one of the biggest online money laundering schemes ever uncovered.

Matonis views Bitcoin as a “futuristic” endeavor that is being unfairly targeted by California authorities in a state that considers itself the capital of innovation. Do you agree?

Read the full cease-and-desist letter here.