Last updated on August 17th, 2016 at 08:54 pm
Critics of Bitcoin have long accused the currency of enabling illicit trade due to the currency’s relative anonymity. These critics may have a point as Bitcoin was the key currency supporting the recently busted Silk Road website. Now, the FBI is trying seize over 600,000 Bitcoins from Ross Ulbritcht, who is accused of setting up the popular drug and illegal trade website.
For those of you unfamiliar with the Silk Road, it had become the world’s number one site for conducting illegal trade. Users could literally buy and ship drugs and other materials across the United States and even from country-to-country. The Silk Road required that all transactions be conducted in Bitcoin, helping to secure users identity and making it harder for enforcement agencies to follow the money trail.
The FBI alleges that the Ulbritcht founded the Silk Road, which has become a sort of Craigslist for drugs, murder, and other illegal activities. The site has also been accused of supporting the sale of child pornography. Estimates for annual sales numbers range from $15 million to $45 million or more and it is believed that nearly 1 million people have registered for the site.
Interestingly, the security features of Bitcoin appear to have paid off. After several days of trying to seize Ulbritcht’s personal Bitcoin account, the FBI has yet to gain access. The coins are encrypted and the FBI lacks the keys necessary to unlock them, meaning that for now the agency cannot directly access them.
Shockingly, it is believed that Ulbritcht actually holds some 5% of all Bitcoins in circulation. Not only does this offer strong proof that the currency has been a major enabler for drug dealing and illicit activities, many Bitcoin traders are wary of what will happen if the FBI manages to secure Ulbritcht’s Bitcoins. The FBI has stated that it will liquidate all Bitcoins once legal proceedings have finished up. The sudden influx of so many Bitcoins could cause market instability.
While national governments have largely ignored Bitcoin, or in some cases even offered tentative recognition, the use of the currency to fund illegal activities may make it a target for further government oversight, or even downright persecution. The American government now has the clearest proof yet that Bitcoin is being used to fund illegal activities. If the government decides that Bitcoin is a threat to the rule of law, it might decide to take action against the currency.
Either way, Bitcoin users would be wise to follow developments in this case. The Silk Road had become one of the more famous market places for Bitcoin, but it also represents a minority of the Bitcoin community. Most users use Bitcoin for legal purposes, not illegal activities. Still, the impacts of this case could affect the Bitcoin community at large.