There has been some recent conversation around the idea of Bitcoin, Terrorism, and how the digital currency could be a trump card for anonymous financing.
When language like this pops up in political spheres, governing bodies, in their usual knee jerk manner, have a habit of overreacting through unnecessary regulation – a Bitcoin enthusiast’s (and company’s) worst nightmare. Don’t get us wrong, we don’t believe regulation is a bad thing – we believe unnecessary regulation is a bad thing, and more specifically, early regulation is a bad thing.
US Representative Steve Stockman (R-TX) sums it up well:
“It’s too early to be talking about [Bitcoin regulation]. Just imagine if Steve Jobs had to deal with this, or anybody starting an Internet company having to hop through the obstacles they’re putting up.”
We feel you, bro.
But getting back on topic, we don’t believe there is much validity to the claims being made out there, so the Harborly Team decided to do its own research. Part of this research included reaching out to Dr. Aaron F. Brantly, Assistant Professor of Cyber International Relations at West Point, and we believe we have been able to shed some light on the situation and significantly substantiate our belief.
“We should not fear new technology. Instead, we should be respectful of its capabilities and limitations.” – Dr. Aaron F. Brantly, Assistant Professor of Cyber International Relations at West Point
As with any traditional currency, Bitcoin can be used for good or for ill. But granted, Bitcoin is an extremely unique member of the currency club. For example, the use of Bitcoin comes with a myriad of benefits—instant online transfers of funds with no middleman, faster confirmations than traditional online services, pseudonymous accounts, etc— and they have been discussed, improved and innovated on top of at length by the Bitcoin community since its inception in 2009. A force that shows no sign of slowing.
Recently, some have turned their attention to how these benefits could be used by those who mean harm, specifically terrorist organizations looking for a more efficient means of funding their operations than Hawala, traditional banking, and the sale of narcotics and weapons.
While it is possible that as Bitcoin gains wider acceptance, terrorists can choose to utilize it for their own nefarious purposes, as they have with social media, it is by no means the magic bullet of terrorist financing some regulating bodies are purporting.
To make our case, we’ve summarized the major anti-Bitcoin argument (as related to terrorist financing) going around, followed by our explanations why it is, well, stupid.
Perhaps the biggest fear when it comes to Bitcoin and terrorism is the idea that it will provide a completely anonymous and untraceable avenue for money movement. A recent article by SkyNews, covering an allegedly ISIS linked blog post, details how members and supporters can successfully fund the terrorist organization without fear of discovery.
There are advantages to using Bitcoin in a terrorist organization (just like there are advantages to using computers, cars, the Internet and just about any other innovating concept), but the claim that Bitcoin use completely removes the fear of discovery and traceability is, simply put, incorrect.
There’s a common misconception that Bitcoin is an anonymous medium of exchange. While Bitcoin uses a different methodology than we’re used to when tracking and recording transactions, it does just that – tracks and records transactions. All in a 100% transparent, public ledger, available to anyone with a computer in its entirety.
The US government knows this, and even recently used Bitcoin’s public ledger as part of their successful charge and conviction of Ross Ulbricht, creator of the massive online drug market-place, the Silk Road. It can kind of suck when all your illegal money transfers are sitting out there on people’s computers, eh Ross?
“The use of Bitcoin by terrorists or criminals is always going to be a possibility, yet the fact remains that the fundamental structure of the block chain offers a welcome warning to those who would seek to corrupt novel advances in commerce.” – Dr. Aaron F. Brantly
Currently, for pure Bitcoin to Bitcoin transactions, there are multiple ways to discover the location and identity of the individual in question. While it takes some technical know-how (something well within governmental capabilities), good luck trying to do this with cold-hard cash.
Tracking identity gets even easier when considering the other (and very necessary) side of the use case – converting a national currency into Bitcoin for transfer, and inversely, converting Bitcoin to a national currency for spending.
When an individual wants to buy or sell any sizable amount of Bitcoin, they need to interface with a Bitcoin retailer like Harborly or an exchange like Bitstamp, all of whom adhere to extensive KYC (Know Your Customer) policies. There are many reasons why companies in the Bitcoin biz do this – anti-fraud, compliance with jurisdictional anti-money laundering law, and so on – but the end result is that people entering or exiting the Bitcoin markets had to verify their identity with one service provider or another, thereby permanently linking their true identities to a sequence of fully public Bitcoin addresses.
“Individuals engaging in legitimate commerce using Bitcoins have an incentive to maintain the integrity and validity of their marketplace in the face of all threats. Whereas with cash there might be only one or two people watching, with Bitcoin there is an expansive network ensuring mutual financial security.” – Dr. Aaron F. Brantly
Keeping Threats of Misuse in Perspective
Despite the potential benefits for these groups using Bitcoin, there are enough logistical and security problems that it is unlikely to become a problem. It depends, in part, on how governments and financial institutions decide to handle the growing emergence of Bitcoin into the mainstream economy.
It also depends on whether Bitcoin becomes integrated into tradition financial systems or remains its own decentralized, unregulated entity. This is a question that users and proponents of the currency must wrestle with as a community.
It’s important to point out that by far the most used method of funding terrorism is cash-based through the sale of drugs, oil, and weapons and that in comparison, the use of Bitcoin is almost nonexistent.
Nevertheless, it is an important threat to keep in mind as we move forward in the evolution of this technology, but, for the moment at least, the focus should stay on fostering innovation and creating a robust system that is safe for all users.
The views expressed by Dr. Aaron Brantly above are his alone and do not reflect the official policy or position of the Department of the Army, Department of Defense, or the U.S. Government.
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