Bitcoin vs Illegal Transactions
You hear this argument a lot among politicians, bankers and most ‘dinosaurs’ within the traditional monetary sector. Their argument is that Bitcoin needs to be regulated because of its use in the illegal drug and fire arms trade. Most notably marked by the growth and demise of SilkRoad, an online marketplace which facilitated the trade of illicit substances and other criminal services, has lead to increasing amount of fear and the spread of misinformation about Bitcoin within the main stream media. Although this agenda hasn’t been push by news outlets in recent months, that doesn’t mean this proposed ‘problem’ isn’t being discussed within the Governments of the world.
Just this week Ben Bernake spoke at the Ripple sponsored Swell event supporting payment processing blockchain solutions, but echoed his previous statements regarding Bitcoin’s anonymity and use in illicit transactions by saying
Eventually governments will take any action they need to prevent Bitcoin
I see all of this as media manipulation to ensure the powerful players in the financial world, retain that power against the most formidable opponent they have ever faced. To put this into perspective the US Dollar has been involved in the transaction of illicit drugs and services almost since it’s inception, and still remains the preferred currency of choice for drug cartels the world over. Pablo Escobar the Colombian ‘King of Cocaine’ was losing an estimated $2.1Bn a year because he couldn’t launder the money fast enough, leading to huge stock piles of Dollars being water damaged or eaten by rats (according to Roberto Escobar in his book “The Accountant’s Story: Inside the Violent World of the Medellin Cartel”).
The problem goes even further with giant banking institutions such a Santander and HSBC being involved in an amazing catalogue of criminal behaviour. In July 2012 the US Senate Committee on Homeland Security and Governmental Affairs issued a 339 page report which included accounts of the bank washing over $881m for the Mexican Sinaloa Cartel and allowing Saudi bank Al Rajhi to finance terrorist groups. Jack Blum an attorney and former Senate investor was quoted as saying
They violated every goddam law in the book. They took every imaginable form of illegal and illicit business.
Despite this no individual at or involved with HSBC was ever sentenced, instead the company paid a $1.6bn fine which will likely be offset by an increase in fees. Furthermore no main stream media outlet was crying out for tighter regulations around the Dollar and spreading fear about owning Dollars due to it’s links with illegal activity.
Compare that to Kim Dotcom’s story. Kim was the founder of a file sharing site called MegaUpload which gained worldwide attention in part by the availability of free movies and tv shows. Dotcom has been fighting extradition to the United States after the US raided his home and seized all his assets, despite Kim not owning any of the illegal material hosted on the site. The company regularly took down content when publishers requested, but not to the extent or the rate which that would appease the industry giants, leading to a litany of law suits.
I think there is a huge distinction between creating a platform that facilitates the upload of legal or illegal content and knowingly launder money for the worlds largest cartel. It just so happened that Dotcom was an easier target than the banks, and one that isn’t deemed ‘too big to fail’. This is all a round about way of saying that Bitcoin and blockchain technology is a legitimate technology, and one that goes someway to giving power back to the people. I don’t advocate the blockchain’s use for illegal activity, but I don’t for a second believe any argument for stricter regulation based on a marginal use case.
In the coming years we’re likely to have a real fight on our hands to preserve the essence of the blockchain’s decentralization, and for those who believe in the technology, it’s worth fighting for.
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