I’m traveling out West this week, in Las Vegas for EMCworld (catch the coverage I’m producing with the team on our live channel through Wednesday!), so for folks on the East coast, I’m sleeping in a bit later than them. You can imagine why I was a little bit alarmed this morning to get a call at 6AM Pacific time from Wells Fargo asking what Bitcoin was, how I used it, and if I sold it to other people.
I was caught in a net that Wells Fargo appears to be doing of their customers who interact with popular Bitcoin transaction facilitator, Coinbase. They seemed keenly interested in my expertise around Bitcoin and exactly what I was doing with this mysterious internet stuff (“So Bitcoin is like Paypal, basically?”).
Since the September 11 terrorist attacks, the US government has put in place numerous security measures to try and prevent such a horrific event from happening again. One of these measures is the USA Patriot Act, which gives different government agencies extensive powers to counter terrorist acts, which among many other things includes “Know your customer” regulations aimed at preventing regular folks from acting as money service providers, as a way of preventing terrorists and drug dealers from proliferating.
Another outgrowth of the Patriot Act and it’s regulations around money, a division of the Department of Defense is looking into Bitcoin and other digital currencies and their potential to help finance terrorist acts.
The Combating Terrorism Technical Support Office, which identifies and develops counterterrorism abilities as well as investigating irregular warfare and evolving threats, is now looking into how virtual currency may help fund acts of terrorism.
An unclassified memo by the CTTSO was obtained by Bitcoin Magazine, which revealed concern about how virtual currencies can be used to finance threats. The memo suggested what areas should be looked at to determine the level of threat virtual currencies actually pose.
“The introduction of virtual currency will likely shape threat finance by increasing the opaqueness, transactional velocity, and overall efficiencies [sic] of terrorist attacks,” the memo read.
The memo proposes solutions to be considered, such as identifying relevant case studies from the last 20 years and exploring funding instruments that supports terrorism; determining types of “red flags” that can emerge with the introduction of virtual currencies; investigating how virtual currencies can be used to predict future attacks; and developing and deploying strategies to prevent them, among others.
The memo depicts Bitcoins and other virtual currencies as something that can be used for both funding and counteracting terrorism.
This is obviously what concerns the authorities. Bitcoin and virtual currencies could easily be used to fund threats. Even so, that doesn’t mean Bitcoin transactions go completely under the radar – as Ross Ulbricht, founder of the notorious Silk Road website, found to his cost.
The problem is that instead of trying to understand Bitcoin before labeling it as good or bad, some people have jumped to conclusions due to the bad press its received in the past.
Pelle Braendgaard, the CEO of Bitcoin wallet Kipochi, explained in an interview that the cryptocurrency can actually help governments better understand what’s happening with their economies since every transaction is recorded on the block chain, unlike when using real money when no one has a clue where the money ends up.
Yes, cryptocurrency can be used to fund terrorism (and Overstock.com and Nascar…), but it is quite unfair to single it out for that purpose. After all, US dollars can and are used to fund terrorism all the time. All of the so-called ‘worries’ about Bitcoin could be perceived as propaganda to dissuade people from using it.
The safest bet for would be terrorist sponsors will always be cash, something that can’t easily be traced back to them. Quite unlike Bitcoin, where every transaction is recorded publicly on the Blockchain.
During the U.S. Senate hearings on Bitcoin, FinCEN director Jennifer Shasky Calvery told Congress that “…cash is probably still the best medium for laundering money.”
It should also be noted that charitable foundations have been used to accumulate funds for terrorist activities too. A case in point is the Holy Land Foundation for Relief and Development, which was convicted in 2004 by the US federal court of funding Hamas, a Palestenian Sunni Islamic organization with a military wing that doesn’t care if civilians get hurt during operations (a story I covered very closely in my online coverage at the time as well as my post 9-11 radio briefings for WABC).
At the end of the day, at this juncture, Bitcoin poses an almost inconsequential security risk to what those who seek to curb money laundering for the purposes of national security and drug prevention mostly because of the market cap for the cryptocurrency. Bitcoin is still in the early days of its life; the market cap of Bitcoin is shy of $6 billion (and the market cap of all other alt-currencies is certainly shy of $2 billion). Globally, it is estimated that there is around $5.5 billion laundered each day. While the potential disruption of Bitcoin is great, it’s barely a blip on the radar when it comes to current criminal enterprises.
Thanks to the lawyers from http://mycaliforniadefenseattorney.com/ for providing us enough info about criminal defense.