Two Held Over Illegal Bitcoin Site In France

An illegal bitcoin exchange has been broken up by French police, in the first such operation in Europe.

Prosecutors said they seized 388 virtual currency units, worth around €200,000 (£160,000), in the planned action.

Two people were apprehended in the Mediterranean towns of Nice and Cannes and were placed under formal investigation.

They were held on suspicion of operating a website which illegally sold and lent bitcoins to registered users.

The home of one suspect was raided last week and a portfolio of bitcoins, valued at around €9,000 (£7,100) each, were seized.

Credit cards and computer hardware were also seized in the raid.

"It's the first time in Europe that a judicial action has resulted in the closure of an illegal exchange for virtual currency," Olivier Caracotch, prosecutor in the south western town of Foix, said.

"It's also the first time in France that bitcoins have been seized as part of a judicial procedure."

Sources said officers received information about the website from a retired policeman who bought bitcoins and then alerted financial investigators.

It is understood the two suspects were also being investigated on potential charges of illegal banking, money laundering and operating an illegal gambling website.

Earlier on Monday a new blog associated with the Islamic State in Iraq and Syria (ISIS) has said that bitcoin could "enable jihad on a large scale" by sending "millions of dollars" to fighters.

In a post called "Bitcoin and the Charity of Violent Physical Struggle", the author argued such donations would be "untrackable" by Western governments.

Bitcoin exchanges have come under increased scrutiny recently, with the MtGox exchange in Japan being liquidated.