News, Education and Events Decoding Digital Payments & Fraud

News, Education and Events Decoding Digital Payments & Fraud

Dwolla Ends Dealings with Bitcoin Exchanges – Oct. 15, 2013

Dwolla Ends Dealings with Bitcoin Exchanges

Oct. 15, 2013

Dwolla, the Des Moines, Iowa-based online payment processor that had become popular with Bitcoin exchanges and merchants accepting Bitcoin, said it will stop supporting companies that deal in the controversial currency and other digital currencies. In an email to Bitcoin exchange BitBox, Dwolla blamed the move on “recent interest involving virtual currency and its exchanges,” which “has created uncertainty and confusion around virtual currency, and Dwolla’s relationship with a small number of its exchanges.”

The “recent interest” began this spring after a few wild months on the largest Bitcoin exchange, Mt. Gox, which saw a significant run up in the value of Bitcoin and subsequent volatility that led to the exchange shutting down. The U.S. Department of Homeland Security even seized $2.9 million in Bitcoin from Dwolla during an investigation in May and the FBI shut down Silk Road, the online market that transacted solely in digital currency, for drug trafficking. Official scrutiny may just have been too intense to bear to continue with a customer base Dwolla says makes up just .1 percent of its merchants.

“This has forced Dwolla to reassign resources, funds, and services,” the email said. “As Dwolla gears up for a new stage of growth, we recognize that we can no longer sustain this merchant base (.1 percent of Dwolla merchants) and its unique needs, and that attempting to do so jeopardizes both of our communities’ starkly different, but similarly ambitious, vision for improving payments.”

The company began its withdrawal of support last week when it began only allowing existing Dwolla users to send money to its virtual currency exchange customers. Beginning today, those exchanges are limited only to sending money, they cannot receive funds from customers. On Oct. 28, any digital currency exchanges will have their accounts permanently suspended.

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Daniel Leibovitch