Does Bitcoin encourage criminal activity?
No more than a £20 note does.
The position bitcoin finds itself in today is similar to where Napster and other peer-to-peer music services were 13 years ago.
There’s much shouting right now about how the digital currency is apparently sometimes used for criminal purposes. Those quick to level those accusations might want to ask, “Have you seen what the big banks have been up to?”
Banks have been found guilty of deliberately mis-selling insurance products, fixing some interest rates and knowingly laundering money for terrorists and murderous Mexican drug dealers. In that context, accusing bitcoin of criminality does seem a bit rich.
It also sounds rather like the way the entire internet was dismissed early on … as useful only for pornography and crime.
If you think about it, it wasn’t really the offering of free music that made Napster important: it was the operation’s structure that made it really interesting. The impact of peer-to-peer systems – which match the structure of the internet – has been huge to date. And now bitcoin can be seen as the ultimate implementation of peer-to-peer infrastructure.
What’s more, given the state of “real” currencies, the limitations of bitcoin are starting to sound like advantages.
What, no easing?
Economists complain that, because bitcoins are limited to 21 million units, there is no way to inflate or deflate the economy. After years of watching euros, pounds and dollars being printed in order to refinance bankrupt banks, some might see this as a feature not a bug. Certainly we cannot say anything intelligent about the currency’s long-term inflationary or deflationary prospects until all its units are issued and being traded.
What, no sovereign, central bank?
Some have claimed that money fleeing from Cyprus was the reason for bitcoin’s recent peak in value. Whether that’s true or not, the reality is that – right now – having a government backing your currency is not necessarily an advantage. We don’t know who is really behind bitcoin, but we can be pretty sure they’re not going to swipe a third of people’s savings in order to refinance traditional banks. If governments continue to refuse to reform bank regulations while at the same time paying to keep them in business, there remains a strong argument not to invest in their currencies.
What, no 3 percent fees?
Whether bitcoin survives or not, someone is going to go after the banks’ ridiculously high charges for moving money around the internet. No bank ever pays anything like 3 percent transaction fees and there is no earthly reason why we should either. Since the earliest days of the internet, there has been a search for the Holy Grail of micropayments online. None of those available today offers the advantages of a system like bitcoin.
Consequently, there is no doubt the banks will fight to keep their grip on their 3 percent. Some banks have already closed the accounts of bitcoin-related businesses.
Complaining there are no legal uses for bitcoins misses the point in much the same way as when that claim was made against Napster. It’s possible that more bitcoins are already being used legally than illegally: investors (whatever their legality) are getting involved and holding onto the currency rather than converting it straight into cocaine. Could it be that we’ve seen the end of bitcoin’s illegal heyday?
More and more ordinary, garden-variety, not-at-all-black-market services have been joining the bitcoin parade. Last week, one of the big dating sites began taking payment in the currency. Reddit does it, and so does WordPress. How long might it be before your mom starts buying coffee or cupcakes with bitcoins? Maybe not as long as you think.