One feature of recent cyber attacks was how the perpetrators behind these ransomware programs wanted to be paid in Bitcoins. This isn’t that surprising, Bitcoin has become the preferred currency on the dark web and the criminal underworld. It is increasingly used for money laundering, tax evasion, to buy drugs, prostitution, fund terrorism or to even hire assassins.
While there is some “legitimate” bitcoin activity, this mostly seems to be restrained to speculative trading of bitcoins, operating exchanges or “mining” of new bitcoins. Indeed one of the flaws in the ransomware attacks is that its likely to prove very difficult for the perpetrators to recover these funds without being found by the authorities. And the evidence is that very few of those effected paid up. However, its possible they might not care, the whole point of the attacks might just be an investment scam, to create an artificial jump in prices, allowing them to sell high and buy low.
If bitcoin is a vision of a libertarian world, it shows everything that is wrong with that vision. Indeed, as we speak bitcoin is a war with itself, largely because without any central regulating authority, there’s nobody to make the important discussions about how it should operate. This has resulted in the speed of service slowing to a crawl, at one point recently people were waiting 3 days or more for a trade to go through (not exactly convenient if you’re buying a cup of coffee!).
So it is perhaps high time for government’s to consider whether they would be better off just banning bitcoin completely. Now Bitcoin bugs will tell us this is impossible, however by doing so they simply show how naive they are to how governments, currencies or the law works (which of course is exactly the problem with libertarians!).
While bitcoin is technically legal in most countries, this doesn’t mean its “legal tender”. In most countries there is no obligation to use the legal tender for all trades. In the Northern Ireland for example, its not uncommon for shops to accept euro’s. Around a number of US airbases in the UK dollars will sometimes be accepted. And in Argentina, where I was recently, they’ll often take euro’s or dollars. Indeed, even barter is legal in many forms (e.g. part exchange of vehicles, companies accepting payment in kind, etc.). In short, so long as you pay any taxes that are due, the government doesn’t really care what currency you use. In other words, bitcoin is in most cases not legal approved, but its not illegal. There’s a very big legal difference between the two.
In fact banning bitcoin would be scarily easy. All that would need to happen is for a couple of governments to get together (say the EU and the US) and ban the sale or ownership of bitcoins, citing the numerous examples of its misuse I’ve quoted above. At this point all the “legit” bitcoin businesses will either have to fold or move overseas. And given that the currency will tank in value at the same time, my guess is most will either fold, or find a way of establishing a new currency that conforms to this new legislation.
This means the number of bitcoin trades will decline significantly. Now bitcoin advocates think they “the gov’mint” can’t trace them. Well law enforcement says no, we can trace bitcoin trades if we have to, but its a lot of hard work. Given that virtually all the remaining bitcoin trades will be criminal in some nature they’ll find things a lot easier as the number of trades will drop significantly. In effect the criminals will lose their cover. Indeed given that even owning bitcoins is now a crime in of itself, even criminals will want to offload them, else they could be prosecuted for simply owning bitcoins, in much the same way Al Capone was imprisoned not for racketeering and murder, but for tax evasion.
So while there will continue to be some trade in them after such a ban, outside the west, much of the network that supports those trades will vanish and the currency will probably become too unstable to survive, particularly if a legally acceptable (and government regulated) alternative that is better supported then appears.
Of course the message to bitcoin bugs is for them to realise that they are not invulnerable. If they don’t do something to tackle the criminal use of bitcoin, eventually national government will do it for them, likely by wiping bitcoin out of existence.