After nearly five years of unencumbered commerce, the U.S. Senate is moving to regulate Bitcoin, a digital currency conceived in 2008.
In the simplest of terms, Bitcoin exists as a bunch of ones and zeroes with a value determined by trading markets. This concept of fiat currency, as you may know from your Introduction to Macroeconomics class, is quite common. Bitcoin, however, is unique in that it is abstracted from the physical world and has no government-backed value. Bitcoins have as little intrinsic value as FarmVille coins.
Most importantly, Bitcoins are encrypted and secured so transactions are completely anonymous. The Internet naturally has taken this idea of secure, anonymous transactions and run with it. More often than not, Bitcoin is used for illegal transactions.
The Silk Road, a recently quashed online black market, was predicated on the idea of Bitcoin as an anonymous transaction method. Whether it was a high schooler buying a fake ID or a small-time drug dealer buying an ounce of marijuana, it was impossible for authorities to track the purchase and movement of goods because of Bitcoin’s exhaustive security precautions. This becomes a problem when people are using Bitcoins to hire hitmen and purchase steroids or crystal meth.
Moreover, Bitcoin transactions are being used to perpetuate activities as nefarious as child pornography and illicit gambling activities. Bitcoin has largely become a credit card for criminals — an implement that perpetuates dangerous and destructive (not to mention illegal) activities.
Still, the idea of a purely digital currency is an exciting innovation and deserves some attention. An independent currency free of any national affiliation is a step forward for digital economies and has positive implications.
And that is the challenge facing the U.S. Senate: How do you reconcile Bitcoin’s inherent promise with its heinous clientele?
It seems even the government is unsure how to answer that question, considering the sizable contingent fighting in defense of the online currency. Others, particularly Sen. Charles Schumer (D-N.Y.), have taken an adamant stance against Bitcoin.
Whether legislation to ban Bitcoin passes in the United States or not, let’s hope they at least stop criminals from using the Internet to harm lives.
— Morgan Kinney
