Criticisms
DGC providers and exchangers have been accused of being a medium for fraudulent high-yield investment program (HYIP) schemes. In January 2006, BusinessWeek reported that ShadowCrew, an online gang, used the e-gold system in a massive identity theft and fraud scheme. Traditional banks are also used frequently for such fraud. Allegations that e-gold is a safe medium for crime and fraud are strongly denied by its Chairman and founder, Dr. Douglas Jackson. Further, it can be argued that such problems lay with the source of the information or monies, rather than the location of storage of such ill-gotten gains. In other words, it would be difficult to claim the bank as villain when the criminal activity occurred by other parties away from the storage location.
Many DGC providers do not disclose the amount of bullion stored (see table), or do not allow independent external bullion audits, raising concerns that such companies do not maintain a 100% reserve ratio, or that their currency is entirely virtual and not backed by physical gold at all.
Due to increase of compliance requirements for payment service providers, Jersey-based GoldMoney decided to suspend its DGC service as from January 21st, 2012
Read more about this topic: Digital Gold Currency
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