If you’ve heard about Bitcoin, you’ve undoubtedly heard about the links between cryptocurrencies and illegal activities. The media loves to report stories of drug kingpins, and the damning criticisms of people in the financial industry. For those with nothing to hide, it may seem too risky to get involved. Let’s take a look at the truth.
Opinions vs. Facts
Firstly, it’s always important to consider the sources news articles use and to not automatically accept opinions as fact.
Much of the public criticism of Bitcoin comes from people like Jamie Dimon (boss of JP Morgan), Howard Davies (chairman of RBS), and Lloyd Blankfein (boss of Goldman Sachs) whose businesses are impacted by changes in the financial system.
We wouldn’t take it that seriously if the boss of Coca-Cola said only drug dealers drink Pepsi, so it’s vital to take into account where these criticisms are coming from. We should also ask ourselves if they are grounded in solid fact or the opinions of people who stand to lose a lot if cryptocurrencies become mainstream.
Whenever a new, disruptive technology emerges, there are going to be winners and losers. A backlash from opponents to change is inevitable. We all need to do our own research and draw our own conclusions, rather than swallowing whatever opinion a juicy news article throws at us.
Many forms of technology are appropriated for illegal purposes, and it takes time for regulation to catch up. Just because some people use it in that way, it doesn’t discredit the legitimate uses.
It is becoming steadily easier to use Bitcoin for everyday purposes, from paying rent or bills, to buying groceries or a book.
People might want their transactions to be private for reasons other than because they are breaking the law- such as to privately pay for a rehab centre or to send money to family abroad without hefty fees.
Our system of currency and banking has remained very similar for centuries. But as the world changes faster than ever, it may be a good time to rethink this integral part of how we live. Decentralisation has the potential to change things for the better. Other benefits include speed, traceability, and transparency.
Why do illegal drug dealers use Bitcoin?
Whenever there is demand for something which cannot be obtained legally, a black market will always pop up. If Bitcoin didn’t exist, people would use a different method of payment- and have done so for centuries.
Without commenting on the ethics or morality, it’s obvious why Bitcoin is used by illegal drug dealers. It’s seemingly more anonymous than digital fiat and means they can make sales from the safety of their homes. Anecdotal evidence suggests that the people using Bitcoin to buy illegal drugs do so for much the same reasons. They can keep their privacy and avoid the risks associated with in-person sales. Some point out that online reviews of illegal drug dealers make their purchases safer and reduce the chance of buying something which turns out to not be what they expect.
However, all is not as it seems. Bitcoin isn’t as anonymous as assumed. Law enforcement is getting better at tracing Bitcoin transactions and can even confiscate accounts used for criminal purposes. The way things are going, it seems it will eventually become very difficult to use Bitcoin to break the law.
In some ways, it is actually easier for law enforcement to persecute those using cryptocurrencies for illegal online transactions. If the police catch someone with illegal drugs, they may only be able to convict them for that particular sale or possession. If someone selling online gets caught, their entire history is accessible.
The easiest way to fall foul of the law when getting involved in Bitcoin is by failing to declare trades on your tax returns. Statistics suggest that only a fraction of people who have made Bitcoin trades in recent years have paid the appropriate tax. For some people, this may be an innocent mistake as laws are still evolving. Cryptocurrencies are new and are simultaneously a currency, technology, and investment. So if you plan to trade Bitcoin, it’s vital to check the tax laws surrounding it in your country. Law enforcement is likewise cracking down on intentional tax evasion.
So, the answer is no: Bitcoin is not just for drug dealers. It is becoming harder and harder to use it for illegal purposes. Provided you follow the appropriate tax laws and have nothing to hide, using Bitcoin is perfectly legal and brings with it some serious benefits.