Since its inception in 2009, Bitcoin pioneered the way for cryptocurrencies and has boomed into mainstream consciousness in 2017. Blockchain technology promises liberation from centralized banking, but its anonymous nature also puts it in the sights of government and security agencies.
A prime example is the now defunct Silk Road, which was an online marketplace that allowed users to buy and sell everything from drugs and guns, to information, for Bitcoin.
Obviously buying and selling illegal goods will land you in a world of trouble if you are caught. This truly is the dark side of the cryptocurrency world, which allows drug dealers and the illegal arms trade an anonymous and untraceable way of doing business.
The FBI shut Silk Road down and arrested it’s founder Ross Ulbricht, ending the run of the biggest player in the dark web’s trading history. Ironically, one of the investigating agents was found guilty of stealing Bitcoin from Silk Road while he was investigating the online platform.
Encryption doesn’t necessarily equal anonymity
While it’s understandable that anonymous transactions allows nefarious people to do their dirty business, even the European Union believes that cryptocurrencies are not favourable for terrorism.
In a report released earlier this year, a European commision declared that terrorist groups need fiat currencies to operate. The intrinsic complexity of Blockchain transactions is a factor; so is the publicly available ledger. Every transaction made with Bitcoin is recorded on the ledger for all to see – which gives authorities some idea of who is sending who what.
It’s far easier to send cold, hard cash in an envelope than through digital currency, which is inevitably traceable in some way or form.
Using terrorism to force regulation
Terrorism has been a threat to civilised society for decades and governments have done their utmost to snuff out the most significant threats.
There is no doubt that terrorist groups pose a danger to society, but the truth is that the threat of terrorism has also been used as an excuse to spy on the general populace and invade foreign countries.
Following the 9/11 attacks on the World Trade Centre in New York in 2001, America rescinded into Marshall Law and ultimately invaded Afghanistan to confront the Taliban head on.
Since then the US has grown into a massive security state – and it was only a matter of time until the likes of the National Security Agency were caught spying on the American people.
This example is one of the most recent and well known instances of a government actively spying on their own citizens, using the threat of terrorism to infringe on the privacy and rights of their people.
Tax evasion and fraud
This is probably the biggest concern for governments and their respective revenue services. Massive efforts are being made to follow up on cryptocurrency users that have failed to declare their earnings.
American exchange Coinbase was ordered to hand over the details of their biggest users trading details as the US tax man looks to clamp down on tax evasion.
This week, Australia ordered that all exchanges operating in the country to register with its anti-money laundering agency.
These are understandable concerns but a line needs to be drawn in the sand. Earnings made on investments are taxable and people need to understand that.
But making wild and unsubstantiated claims about the nefarious uses of cryptocurrencies as a reason to spy on and demand user information is wrong.
People should use cryptocurrencies responsibly, but we also need to be wary of authorities misusing power to force new and unfounded regulations on the most important technological development of the 21st century.