The e-gold system was launched online in 1996 and had grown to five million accounts by 2009, when transfers were suspended due to legal issues.
Incivil prosecution[edit]
Changing definition of a money transmitter[edit]
The USA Patriot Act, passed in the wake of the September 11 attacks more than five years after e-gold had been launched, made it a federal crime to operate a money transmitter business without a state money transmitter license in any state that required such a license. At the time a money transmitter was in most states defined as a business that cashed checks or accepted cash remittances to send from one person to another person across international borders, such as Western Union or MoneyGram. For example, prior to 2010, California regulated money transmitters under the "Transmission of Money Abroad Law".[54] One of e-gold's competitors, the e-Bullion company, applied for a money transmitter license from the State of California in 2002, but was informed by the State of California that their business which dealt in gold accounts did not fall under the state's definition of a money transmitter.
In 2005 G&SR requested that the IRS SB/SE Division conduct a BSA (Bank Secrecy Act) Compliance examination in order to clarify what regulations, if any, e-gold fell under.[55] The United States Treasury issued a report on January 11, 2006 confirming that e-gold accounts were excluded from the definition of "currency" under the United States Congress and Code of Federal Regulations definitions.
However, in its actions from 2006-2008 the U.S. Treasury Department in conjunction with the United States Department of Justice stretched the definition of money transmitter in the USA Patriot Act to include any system that allows transfer of any kind of value from one person to another, not merely national currency or cash. Using this new interpretation they then proceeded to prosecute the USA-based gold systems, e-gold (and later e-Bullion) under the USA Patriot Act for not having money transmitter licenses, even though these companies had previously been cooperating with regulatory authorities and told they did not fall under the definition of money transmitter. The charge of not having a money transmitter license was eventually dropped against e-bullion. Several years later FINCEN further expanded this definition to apply to foreign companies allowing US persons to open accounts, which forced the Jersey based Goldmoney.com to suspend the ability to transfer value from one holder to another in December 2011.[56]