Mike Caldwell spent years turning digital currency into physical coins. That may sound like a paradox. But it's true. He takes bitcoins – the world's most popular digital currency – and then he mints them here in the physical world. If you added up all the bitcoins Caldwell has minted on behalf of his customers, they would be worth about $82 million.

Basically, these physical bitcoins are novelty items. But by moving the digital currency into the physical realm, he also prevents hackers from stealing the stuff via an online attack. Or at least he did. His run as the premiere bitcoin minter may be at an end. Caldwell has been put on notice by the feds.

Just before Thanksgiving, he says, he received a letter from the Financial Crimes Enforcement Network, or FINCEN, the arm of the Treasury Department that dictates how the nation's anti-money-laundering and financial crime regulations are interpreted. According to FINCEN, Caldwell needs to rethink his business. "They considered my activity to be money transmitting," Caldwell says. And if you want to transmit money, you must first jump through a lot of state and federal regulatory hoops Caldwell hasn't jumped through.

>Caldwell has stopped taking orders for his popular Casascius bitcoins, which have become one of the most recognizable images of the thoroughly intangible digital currency

Because the process is so complicated, Caldwell has stopped taking orders for his popular Casascius bitcoins – which have become one of the most recognizable images of the thoroughly intangible digital currency. In recent months, the feds have cracked down on many other bitcoin operations in similar ways, including Mt. Gox, the most prominent online bitcoin exchange. But Caldwell's case is a little different. He doesn't think he transmits money.

Caldwell doesn't accept U.S. dollars or any type of fiat currency. You send him bitcoins via the internet, and he sends you back metal coins via the U.S. Postal Service. To spend bitcoins, you need a secret digital key – a string of numbers and letters – and when Caldwell makes the coins, he hides this key behind a tamper-resistant strip.

So long as you can keep your Casascius bitcoins safe, nobody can learn the key. To date, Caldwell has minted nearly 90,000 bitcoins in various denominations. That's worth about $82 million at today's exchange rate.

Caldwell takes a fee of about $50 on each coin he mints, but he argues that sending the coins through the mail is not a way of transmitting money. He thinks the coins should be viewed as collectibles.

But, clearly, that's not how the federal government sees things. If he doesn't verify or have a way of knowing whether the owner of the bitcoins is the same person he's sending the coins to, that's a problem, says Faisal Islam, the director of compliance advisory services with Centra Payments Solutions, a company that advises corporations on financial compliance.

Running afoul of FINCEN is a risky proposition. In the spring, the Department of Homeland Security seized two bank accounts belonging to Mt. Gox. The reasoning behind the $5 million seizure: Mt. Gox, like Caldwell, hadn't registered itself as a money transmission business. FINCEN did not return a message left by WIRED on Wednesday, but according to the letter it sent to Caldwell, dated Nov. 15, the agency believes that Caldwell's business is a "money services business," that must be registered with FINCEN.

Because he runs a bitcoin-only business, Caldwell says there's no Casascius bank account for authorities to seize. But he adds that he has no desire to anger the feds, whether he agrees with them or not. So he's cranking out his last few orders and talking to his lawyer. He says this may spell the end of Casascius coins. "It's possible. I haven't come to a final conclusion," he says.

Caldwell isn't the only person who makes physical versions of bitcoins. You can also buy bitcoins that look like dollar bills or tickets or even other types of metal coins similar to Casascius.

Noah Luis, another virtual currency coin-maker who produces metal litecoins as well as bitcoins, says he has talked to Caldwell and is carefully watching his case. Luis and his company, Lealana, isn't registered as a money services provider – like Caldwell, he doesn't believe that swapping bitcoins for bitcoins qualifies – but he says he'd probably follow Caldwell's lead if he receives a similar letter. "I'd probably stop production and sales, just to be safe," he says.

Minting digital currency has been lucrative for Caldwell, but it's not without its stresses. For one thing, as the value of bitcoins has soared, the value of Caldwell's inventory has gone up too, making theft and fraud a bigger concern. "When the coins are worth $1,000 apiece, that's a ridiculous amount of money," he says. They might be worth even more now, as collectibles, should Caldwell get out of the business.

On Monday, someone forwarded him a photograph of tamper-resistant hologram labels made to look like the ones used on Casascius bitcoins. They were fakes. But now Caldwell is worried that someone may be out there counterfeiting his bitcoins.

And with his operations suspended, Caldwell is going to be taking a revenue hit, just as the holidays approach. He wouldn't say how much he has made from his bitcoin business, but things really took off in 2013, he says. "It's good money, but I went and spent $5,000 in lawyer bills in two weeks."

Additional reporting by Kif Leswing.