So how will that regulation work?
Buyers whose bitcoins that are ultimately converted to spendable dollars risk prosecution if they fail to report transactions of $10,000 or more. FinCEN works with foreign governments as well as domestic law enforcement. Its increasing use of advanced technology can detect unusual money flows in and out of the banking system. It will be a huge deterrent to hidden transactions and a setback for the $10 trillion global black market in which the virtual currency was becoming the coin of the realm.
Could such scrutiny spell the end for bitcoins?
It's a turning point. Bitcoin is more likely to follow the path of Linux, which began as free software and is now widely used by thousands of companies for some or all of their software needs. Once mainstream companies like IBM began to use it in custom applications, it became ubiquitous and legitimate. And although the software was technically free, companies charged for maintaining and installing it. Bitcoin could evolve the same way, playing a role in making e-commerce payments cheaper and more efficient. And legal.