Bitcoin
Is Bitcoin a friend or foe? It’s difficult to say…It is also used for paying for everything from drug trafficking to arms deals.
Bitcoin is open to everyone and you don’t need permission to use it – and that, of course, comes with downsides. Several politicians and banking experts have labelled Bitcoin a currency for criminals, pointing out that it’s a perfect aid for tax evasion, money laundering and the financing of terrorism. And it is true that Bitcoin can be used for all these things.
One particularly high-profile use of Bitcoin for criminal purposes is in ransomware blackmail cases: hackers incapacitate the computer systems of companies, governments and even schools or hospitals before demanding a ransom in Bitcoin. Alternative cryptocurrencies such as Monero are also worth a mention because they’re even more anonymous than Bitcoin.
The sum of money handed over in the form of cryptocurrency in such attacks grew by over 300 percent in 2020 – the latest data from Chainalysis attests to that. But it also shows the total amount of scams, blackmail and other illegal activity is no higher in the crypto sector than in the regular economy, where criminals and con artists were active long before Bitcoin.
Chainalysis also estimates that the criminal share of all crypto transactions in 2020 was below one percent. A study conducted by the Massachusetts Institute of Technology in the United States claims to have evaluated all Bitcoin transactions to date and concluded that only three percent of them were related to criminal activity. If that data is correct, the criminal element of Bitcoin is no greater than in traditional markets, and drug dealing, blackmail and con artists all existed before Bitcoin was founded in 2009.
One key difference here is that Bitcoin transactions are in fact traceable. It may not be public who is behind each address but once the connection is made, authorities can quickly follow the money. Dealers and other criminals have been arrested this way all over the world, proving why the Italian Mafia, for example, prefers to stick with cash over Bitcoin.
The fact that Bitcoin facilitates dodgy dealing isn’t in doubt, and we saw this in action in the Silk Road black market platform, whose founder Ross Ulbricht is serving multiple life sentences for narcotics and other criminal charges. Many early Bitcoiners first came into contact with the currency when buying drugs online and, unsurprisingly, believe Ulbricht was punished far too harshly. Their argument is that Silk Road massively increased customer safety, meaning there was no more putting yourself in harm’s way. But the truth is: Bitcoin made an online drug market possible.
That’s Bitcoin for you – it really is for every person and every purpose.
