Last week, the FBI successfully shut down Silk Road, an online illegal-drug marketplace, and arrested its alleged founder, Ross Ulbricht. You may have heard more, though, about the part that didn't go so well for the bureau: seizing Ulbricht's 600,000 Bitcoins.
Bitcoin is an anonymous digital currency. It is the medium of exchange that was used on Silk Road, and Ulbricht's apparently flush with the stuff. (His 600,000 Bitcoins are thought to be worth about $80-million.) So far, though, the FBI has not been able to get at the digital file storing the encrypted information that is Ulbricht's fortune. Frustrated? Federal agents must be. But they deserve credit for not taking it out on Bitcoin, which they have made clear is a perfectly legal tool with legitimate uses.
Unfortunately, officials in the U.K., where several arrests followed the Silk Road take-down, seem less sanguine. According to the National Crime Agency, Britain's newly formed federal law enforcement agency, it plans to lead a campaign against virtual currencies that supposedly threaten the U.K. That's not only the wrong approach, it's the wrong way of looking at the problem. What needs to be addressed is the violence or fraud being perpetrated by criminals (the NCA says Silk Road was being used for both purposes, as well as illegal drug sales), not the methods of payment.
The fact that Bitcoin offers people privacy and a way to engage in voluntary transactions without the government determining the value of their holdings is not a good enough reason to go after it. Neither is the fact that Bitcoin may require law enforcement to work a little harder when it does find criminal elements. That's the nature of policing in a free society: You have to accept some extra hurdles on the government side so that citizens can maintain autonomy. And there are plenty of legitimate reasons a law abiding citizen might have for wanting to use digital currency, from being fed up with bank fees to wanting to transfer funds to a relative without enriching a middleman like Western Union or Moneygram in the process. There's also the matter of trading with someone in another country without fussing with exchange rates and conversions.
Could Bitcoin be used to fund terrible things like assassinations and stolen goods trafficking? Of course. But so could Monopoly money if enough people agreed to use it. Certainly cold hard government-issued cash has not proven immune to involvement in major crimes and can also be hard to trace. The evil and avarice that live in people's hearts will not be eliminated by stamping out any particular currency. Though driving that currency underground onto a black market could make the process of policing crimes a lot harder than it already is. And speaking of black markets...
I don't think it's a coincidence that the vast majority of crimes apparently associated with Bitcoin-heavy Silk Road involved illegal drugs. Because these drugs are available only on the black market, obtaining them usually involves dealing with distasteful and sometimes violent networks of dealers. Silk Road was a way for people who just wanted drugs for their own quiet personal use to bypass that risk. As HuffPost blogger Meghan Ralston points out in an excellent post, Silk Road gave buyers a chance to check out other customers' product ratings before making a purchase and spared buyers the danger of meeting strangers in dark alleyways. It was a way of stripping away a lot of the extra harms that prohibition has added to what would otherwise be an essentially victimless crime.
In this way, the $1.2-billion spent in Bitcoins on Silk Road is really telling us something. Clearly the appetite -- or market or drive or desire -- for these products is strong enough that it will exist and triumph regardless of prohibitions and expensive enforcement. So maybe we should be reconsidering the criminalization. I have a feeling following Bitcoin use could teach us many other similarly useful lessons about where regulation may have gone too far or is less effective than harm reduction strategies might be. I'm not saying the fact that a handful of people spend currency on something means that thing should be legal. Obviously someone using Bitcoins to hire a hitman (as Ulbricht is alleged to have tried to do) would not override our moral and legal precept against murder. But if a booming Bitcoin industry exists in an area where no violence or stealing is happening -- for example, gambling or consensual sex -- that's probably a good sign that government should stop kidding itself by pretending it can stop the behaviour (and wasting a lot of money in the process of trying).
Some people expected the end of Silk Road to be the end of Bitcoin. It wasn't. The currency experienced a major drop in value when the FBI moved in, but it rebounded almost as quickly. The appetite for a way to invest indepently and privately lives on and is not restricted to people engaged in illegal activities.
I don't underestimate the government's ability to catch up to some degree -- to find ways to ensure it's collecting taxes on Bitcoin transactions and to get better at cracking the passwords of Bitcoin wallet-holders whose assets it is trying to seize. I just hope government also takes a moment to listen to Bitcoin and learn what its growing popularity and uses reveal about what many people want. The rise of Bitcoin signals a strong desire for independence and control, for a bypassing of red tape and snooping. Politicians would be wise to take that signal to heart and govern accordingly. Doing so will lessen the chances that it will have a movement less benign and transparent than Bitcoin to contend with in the future.
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