[Pearls Before Swine]

I can see activities being illegal, but not the currency or means of a measure of value being illegal.

I see two avenues of government attack. First, the government is required to create money and have it accepted for all debts, private and public. That's the competition angle. Second, and probably more important, bitcoin enables barter. Barterers are supposed to convert back into dollars and report income, but many don't. Wouldn't bitcoin make it even harder to track transactions?

So, if I were a greedy government rep, I would also accuse the exchange operators of fostering anonymous transactions and thereby facilitating illegal hiding of income on the part of their customers.

[A CA Guy]

I know that one of the largest entities that posses bitcoin is the US government who has seized a whole bunch of it already when busting folks for various things.

Rather than lose the value of what they have come into, I think the Feds will rather regulate it and like a good mafia type of organization will take it over and move out all who had control over it before.