Authorities Blame Bitcoin for Rising Drug Usage, Fail to Consider Loopholes
Designed as a peer-to-peer, borderless, digital payment solution, bitcoin (BTC) continually finds itself shrouded in controversies, scams, uninformed media claims and, unfortunately, dark net marketplaces.
Bitcoin’s Properties Make It a Perfect Darknet Currency
Although bitcoin’s existence is that of a simple digital token, its misuse results in widespread legal crackdowns. Gangsters and darknet entrepreneurs increasingly use BTC to finance their global supply chain network, dealing principally in drug trafficking.
The underlying technology of bitcoin, blockchain, is a publicly accessible, immutable ledger that records every transaction made. However, the ledger has no way of defining bitcoin ownership, or even location, of those who hold them. Wallets and storage services meant for digital currencies require only a password for access, while the currency itself is a string of random numbers and letters, and records no personal information.
This aspect makes the world’s largest digital currency a preferred mode-of-payment for the dark web – an encrypted, ‘private’ part of the internet which is not indexed by search engines.
For years, governments and security authorities have only been moderately successful in trying to take down the darknet, blaming bitcoin’s usage along the way.
The most documented darknet website takedown was that of Silk Road in 2013. The marketplace, which evaded law authorities for years, was a hotbed of drugs, forged documents, and hacking software.
After the closure, authorities recovered 144,336 bitcoins from Silk Road, valued at just over $48 million at the time, and ironically sold them in a 2016 auction.
E-Druglords Are ‘Bitcoin Millionaires’
The currency, which has already risen 9,000 percent since 2015, has turned many into overnight millionaires. But for a few people, the gains aren’t due to investing in the coin early on or by day trading. Instead, they are owners of businesses on the darknet and earn their income almost exclusively in BTC.
Aaron Shamo, a former Apple and eBay employee, started accumulating BTC ever since its introduction in 2009. Later in 2017, bitcoin’s famed bull run shot the value of Shamo’s BTC holdings to $10 million, in what would appear as an ‘expert bet.’
However, authorities discovered early in 2016 that Shamo’s wealth was due to his massive underground business of fentanyl, a fatal opioid sold exclusively on the dark market.
Currently awaiting trial, Shamo is charged with alleged fraud and faces restraints due to 28 fatal overdoses from his ‘product.’ To authorities, Shamo is amongst the increasing number of entrepreneurs who conduct their business in illegal markets, “and cover their tracks with cryptocurrencies.”
According to data from the United States Center for Disease Control (CDC), fentanyl overdose has resulted in the death of over 20,000 people, leading regulators subsequently blaming the darknet and bitcoin itself.
American Postal System not Held Accountable
Interestingly, government authorities are quick to blame bitcoin for fueling many illicit activities, but never make comments about the supply chain and logistics system that makes actual delivery possible: The U.S Postal Service (USPS).
Criminals utilize a simple loophole in the postal system which makes the mailing of drugs possible. According to authorities, the USPS has no requirements on providing information to make a delivery, including not declaring the contents of a package. Thus, it is a straightforward method for underground markets to parcel their products.
This lack of oversight proves that bitcoin in itself causes no harm, and is not wholly responsible for facilitating the million-dollar underground drug network.
According to Perianne Boring, president of the Chamber of Digital Commerce:
“Cryptocurrencies do not kill people. Opiates are killing tens of thousands of people a year. Blaming bitcoin for this crisis would make as much sense as blaming the internet or cars that drug traffickers have to use.”
Industry groups further argue that bitcoin owners are not entirely anonymous, as they cash out and purchase cryptocurrency through exchanges, which require personal information to set up an account. Hence, bitcoin users are ‘pseudonymous.’
A Justice Department official added:
“At some point, bitcoin is only as good as where you can spend it. You look at where the currency enters the mainstream financial system in order to get spent.”