Is Bitcoin rat poison? Cryptocurrency, crime, and counterfeiting (CCC).

• Author: Engle, Eric
• Position: Introduction through Currency Powers Under the U.S. Constitution: The Federal Money Monopoly, p. 340-365

Introduction

Distributed cryptographic currency, most famously exemplified by bitcoin, (2) is anonymous (3) on-line currency backed by no state. (4) The currency is generated by computation ("mining"), purchase, or trade. (5) It is stored and tracked using peer-to-peer technology, (6) which can be compared to file sharing (7) systems such as torrent. (8) Because cryptocurrency relies on distributed computing it does not require a central clearing house, (9) unlike government issued currency. 10) Because the transfer of funds is distributed, decentralized, and encrypted, it is in theory very difficult, and in practice nigh impossible, to trace the funds used in cryptocurrency transactions, whether to buyer or to seller. (11) Anonymity can be further strengthened by use of TOR (12)--onion proxies to obfuscate users' IP addresses (13) and tumbler software to render transactions obscurely. (14)

The anonymity cryptocurrencies offer enables criminality (15) such as arms sales, drug dealing, (16) human trafficking, murder-for hire, (17) money laundering, (18) sale of child porn, (19) and sanctions busting. Such a network of anonymity and criminality would also be ideal for state sponsored terrorism (21). Frankly speaking, the social costs and dangers posed by cryptocurrency far outweigh any potential use of cryptocurrency to fund U.S. or allied intelligence operations secretly as part of the CIA's "black" budget, which is the only potential upside to these facts that one could imagine from a governmental perspective. (22)

Supposedly, cryptocurrency would be at least as efficient as state issued currency (23) and make economies in the market (24) e.g., through reduced transaction costs. (25) However, that usually libertarian (26) argument ignores the central role of currency and finance law in affairs of State, as well as the state as regulator of legal transactions. (27) More "efficient" murder and more "efficient" illegal arms sales are obviously not in the interests of society or of the victims of crime. (28) The terrorist potential for cryptocurrency is bigger than for hawala banking. (29) Hawala banking, unlike cryptocurrency, must be halal i.e. in conformity with Islamic law. (30) Hawala banking has allegedly been used by terrorist groups such as Al Qaeda: Islamic law specifically prohibits targeting children and other non-combatants right in the Koran itself. (31) Many fatwas issued by respected imams have accordingly declared terrorism unislamic. (32) Cryptocurrency in contrast is not required to conform to Islamic law and unlike hawala banking is completely anonymous and more easily accessible to any terrorist group or organized crime. (33)

As well as enabling all types of crimes and presenting potential for terrorists anywhere, bitcoin (34) and similar distributed cryptocurrencies, such as dogecoin, present a cryptographic risk to United States' national security. (35) Bitcoins are generated and their transfer secured through distributed cryptography. (36) One may rightly ask just what "math problems" bitcoin and other cryptocurrencies are used to solve. (37) Distributed computing to obtain massive brute force computing power for encryption (38) using a public key system (39) to encipher transactions, (40) the backbone of cryptocurrency, can also...