One of the very common misconceptions about Bitcoin from its inception is that

it would make a great currency for criminals and terrorists. A long list of press

articles have been published with unsubstantiated claims that terrorists or

criminal gangs are using Bitcoin for their activity. Many of these articles have

been retracted,

7 but not before they have imprinted the idea into the minds of

many people, including misguided criminals.

The reality is that Bitcoin's ledger is globally accessible and immutable. It will

carry the record of every transaction for as long as Bitcoin is still operational. It

is inaccurate to really say Bitcoin is anonymous, as it is rather pseudonymous. It

is possible, though not guaranteed, to establish links between real-life identities

and Bitcoin addresses, thus allowing the full tracking of all transactions by an

address once its identity is established. When it comes to anonymity, it is useful

to think of Bitcoin as being as anonymous as the Internet: it depends on how

well you hide, and how well the others look. Yet Bitcoin's blockchain makes

hiding that much more difficult on the Web. It is easy to dispose of a device,email address, or IP address and never use it again, but it is harder to completely

erase the trail of funds to one bitcoin address. By its very nature, Bitcoin's

blockchain structure is not ideal for privacy.

All of this means that for any crime that actually has a victim, it would be

inadvisable for the criminal to use Bitcoin. Its pseudonymous nature means that

addresses could be linked to real-world identities, even many years after the

crime is committed. The police, or the victims and any investigators they hire,

might well be able to find a link to the identity of the criminal, even after many

years. The Bitcoin trail of payments itself has been the reason that many online

drug dealers have been identified and caught as they fell for the hype of Bitcoin

as completely anonymous.

Bitcoin is a technology for money, and money is something that can be used by

criminals at all times. Any form of money can be used by criminals or to

facilitate crime, but Bitcoin's permanent ledger makes it particularly unsuited to

crimes with victims likely to try to investigate. Bitcoin can be useful in

facilitating “victimless crimes,” where the absence of the victim will mean

nobody trying to establish the identity of the “criminal.” In reality, and once one

overcomes the propaganda of the twentieth-century state, there is no such thing

as a victimless crime. If an action has no victims, it is no crime, regardless of

what some self-important voters or bureaucrats would like to believe about their

prerogative to legislate morality for others. For these illegal but perfectly moral

actions, Bitcoin could be useful because there are no victims to try to hunt down

the perpetrator. The harmless activity carried out shows up on the blockchain as

an individual transaction which could have a multitude of causes. So one can

expect that victimless crimes, such as online gambling and evading capital

controls, would use Bitcoin, but murder and terrorism would more likely not.

Drug dealing seems to happen on the Bitcoin blockchain, though that is likely

more down to addicts' cravings than sound judgment, as evidenced by the large

number of Bitcoin drug purchasers that have been identified by law enforcement.

While statistics on this matter are very hard to find, I would not be surprised to

find buying drugs with Bitcoin is far more dangerous than with physical

government money.

In other words, Bitcoin will likely increase individuals' freedom while not

necessarily making it easier for them to commit crimes. It is not a tool to be

feared, but one to be embraced as an integral part of a peaceful and prosperous

future.

One high-profile type of crime that has indeed utilized Bitcoin heavily isransomware: a method of unauthorized access to computers that encrypts the

victims' files and only releases them if the victim makes a payment to the

recipient, usually in Bitcoin. While such forms of crime were around before

Bitcoin, they have become more convenient to carry out since Bitcoin's

invention. This is arguably the best example of Bitcoin facilitating crime. Yet

one can simply understand that these ransomware crimes are being built around

taking advantage of lax computer security. A company that can have its entire

computer system locked up by anonymous hackers demanding a few thousand

dollars in Bitcoin has far bigger problems than these hackers. The incentive for

the hackers may be in the thousands of dollars, but the incentive for the firm's

competitors, clients, and suppliers for gaining access to this data can be much

higher. In effect, what Bitcoin ransomware has allowed is the detection and

exposition of computer security flaws. This process is leading firms to take

better security precautions, and causing computer security to grow as an

industry. In other words, Bitcoin allows for the monetizing of the computer

security market. While hackers can initially benefit from this, in the long run,

productive businesses will command the best security resources.