Bitcoin in the Headlines is a weekly analysis of bitcoin media coverage and its impact.
This week’s news coverage was slightly more varied than last week’s, which emphasized the long-awaited arrest of Mark Karpeles, CEO of defunct bitcoin exchange Mt Gox.
The respite from the crime rhetoric was brief if non-existent, however. Serious but arguably not any less bizarre, was the story that police in the Netherlands were on the hunt for a serial bomber, who was planting explosive devices in various supermarket stores.
The connection to bitcoin, although somewhat loose – the perpetrator demanded a ransom in the digital currency – still served to capture the media’s attention, and in turn, contributed to the technology’s ongoing association with criminal activity.
Elsewhere, with regulation always a hot topic, media outlets devoted time to covering the slew of bitcoin companies that had ceased operations in New York as a result of the passage of the BitLicense, its state-specific licensing regime for the industry.
Though the BitLicense may have imposed new requirements on the industry, it has, at least for now, earned bitcoin startups the sympathy of some reporters in the media.
New York Business Journal‘s Michael del Castillo, for example, wrote a piece about the BitLicense’s impact on the New York bitcoin scene.
The piece, titled “The ‘Bitcoin Exodus’ has totally changed New York’s bitcoin ecosystem,” emphasized the negative effects of the law, including the number of firms that have so far announced they will cease to do business in the state.
Del Castillo wrote:
“From the beginning of the process that led to the creation of the BitLicense, the regulation has been controversial. Benjamin Lawsky, the former New York Financial Services superintendent hosted hearings to learn about bitcoin … but bitcoin’s early adopters saw it as a watering down of the anonymity they like about bitcoin in the first place.”
Del Castillo then gave a run-down of some of the companies in the space that had decided to apply for a license – the NYDFS told CoinDesk it had received 22 applications to date – noting the application processes’ cost both in monetary and non-monetary terms.
But, it’s not just bitcoin companies speaking out about the BitLicense, said del Castillo. “This past weekend, Lukasiewicz [Coinsetter’s CEO] said he had two customers close accounts as a direct result of the regulation.”
Cited in the piece, the CEO added that “a lot of people who use bitcoin do it because of distrust of the banks … and they view this as the thing they hate seeping into what they thought was their savior”.
Public opinion of bitcoin may still be black or white, but it may soon be getting darker.
Writing for MIT Technology Review, Tom Simonite looked at the digital currency’s young history noting that its early adopters were mostly criminals.
While this may be nothing new, Simonite presented a novel theory that as bitcoin technology advances, so will criminal activity. The next point of attack, Simonite said, is smart contracts, which he describes as “small computer programs that can do things like execute financial trades or notarise documents in a legal agreement”.
The piece mostly concentrated on the less positive aspects of bitcoin, but the author did note that some companies thought smart contracts had the potential to bring efficiency to financial markets.
Despite this, Ari Juels, a cryptographer and professor at the Jacobs Technion-Cornell Institute at Cornell Tech, was cited as saying that he believes they will also be useful to criminals.
“In some ways this is the perfect vehicle for criminal acts, because it’s meant to create trust in situations where otherwise it’s difficult to achieve.”
He continued: “It was a bit of a surprise to me that these types of crimes in the physical world could be enabled by a digital system.”
Nicolas Christin, an assistant professor at Carnegie Mellon University, agreed that there is potential for smart contracts to be embraced by criminals:
“It will not be surprising …. Fringe businesses tend to be the first adopters of new technologies, because they don’t have anything to lose.”
Perhaps more positively, Christin told Simonite that the scale of criminal activity made possible by bitcoin today, and perhaps by smart contracts in the future, is small in comparison to more traditional, cash-based physical crimes.
Interestingly, Gavin Wood, chief technology officer at Ethereum is cited saying that businesses with legitimate purposes are already planning to make use of his project’s smart contract technology.
Although optimistic about Ethereum’s potential, Wood acknowledged that the decentralised app network would likely be used in illicit ways, although this is what, according to the piece, makes the technology interesting.
Commenting on Wood’s assertion’s, Simonite said:
“Just as file sharing found widespread unauthorised use and forced changes in the entertainment and tech industries, illicit activity enabled by Ethereum could change the world.”
Small business boost
Refreshingly, bitcoin got a mention this week in The Charlotte Observer – a local newspaper serving one of North Carolina’s largest metropolitan areas.
The piece, titled “It’s Your Business: Get to Know Bitcoin”, contributed more positive rhetoric to the news coverage.
Seemingly targeted at small business owners, the article began by highlighting the importance of staying up to date with emerging technologies such as bitcoin.
“One of the best things about being a small business owner, and also one of the worst, is that the ground beneath us is always shifting. Take for example, all the buzz around bitcoin, the worldwide payment system that some are calling a new kind of money.”
The author mentioned an upcoming bitcoin expo and cited Daniel Spuller, one of the event’s co-founders.
Commenting on why consumers should trust the digital currency, Spuller said:
“It took me a good three months to really wrap my head around it, because it was still in the very early stages. And we’re still in the early stages in the grand scheme of things. I always tell the consumer; they have to do their due diligence. They have to research it.”
“Sure there are criminals who use it. But there are criminals who use the $5 bill every day. It’s just a different form. So when people tell me bitcoin is used by criminals, I say so is the $100 bill, so is the Japanese yen,” he added.