Bitcoin exchange Tradehill pauses trading for regulatory reasons

Tradehill Inc., an exchange for virtual currencies such as Bitcoin, is temporarily suspending trading for unspecified banking and regulatory reasons.

“This decision has not been made lightly and we regret having to take such action,” the company said today on its website. “However, we embrace the silver lining of our situation and plan to take this opportunity to upgrade, improve, and polish our trading platform.”

Tradehill has been seeking more business from investors and financial institutions as it works to legitimize virtual-currency trading in the U.S. Created four years ago by a person or group using the name Satoshi Nakamoto, Bitcoin is a virtual currency that can be used to buy and sell a broad range of items -- from cupcakes to electronics to illegal narcotics.

The San Francisco-based company is among several upstart exchanges such as Mt. Gox and BTC-e that have cropped up to support Bitcoin trading.

Tradehill registered this month with the U.S. Financial Crimes Enforcement Network, a U.S. Treasury agency that battles money laundering, it said in today’s statement. The company told customers last week it would transfer their accounts to a U.S. credit union to make it easier to complete transactions.

FinCEN, as the Treasury agency is known, released guidance in March saying digital-currency administrators and exchangers are considered money-services businesses subject to regulations and anti-money-laundering controls. The agency met this week with a Bitcoin trade group.

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