Thou shalt have no other gods before me. The State may have started the ball rolling on bringing an end to Bitcoins in America with Iowa based startup Dwolla. The virtual crypto-currency has been a thorn in the government’s side ever since the currency crossed the billion dollar mark. People have been operating businesses outside of regulation which is apparently only allowed by Wall Street.

The U.S. Department of Homeland Security confirmed it has initiated legal action that prompted the Dwolla payment service to stop processing bitcoin transactions.

Nicole Navas, a representative for U.S. Immigration and Customs Enforcement, confirmed the legal action to CNET this afternoon.

Dwolla, a Des Moines, Iowa-based startup, which raised $16.5 million in funding two weeks ago, notified users about the move earlier Tuesday. It blamed the decision on “recent court orders” limiting its ability to send money through Mt. Gox, the largest bitcoin exchange.

The Orwellian warrant cites Mt. Gox as running an “unlicensed money transmitting business.” Because they have not registered with the government any funds are available for seizure. Yes, the police state is that sloppy.

A spokesman for Dwolla offered few details but said the issue was between Mt. Gox and Department of Homeland Security.

“Unfortunately, other than the information we’ve been able to provide our affected users, we’ve no additional information to provide,” wrote Lampe in an e-mail to Mashable. “We respect the sensitivity of the matter, but the issue at hand lies with Mt. Gox and the Department of Homeland Security/Federal Government. We’re working hard with our affected users to the best of our ability.”

Don’t worry though, DHS would never dare pull this with real drug and terrorist money launderers. This is just for those innovating outside State control/not inclined to bribe the American political class. Stomp away DHS, stomp away.