Bitcoin News - June 02, 2013
"Bitcoins are strings of numbers that can be electronically owned by and transferred among individuals and organizations. For now, the currency is primarily used for payments by fringe retailers or illegal transactions, but it is being accepted more and more widely (Coinbase was created to help that process). And organizations that exchange Bitcoins for standard currency are now being approved to operate as banks." - from Business Insider.
I know a lot about Bitcoin. In fact, I even thought about mining for it but I pulled the plug. This past December - New Years actually - Bitcoin was at $15.00. I again pulled the plug and moved on. I actually thought there was more activity and opportunity in the Egyptian Pound. Nevertheless, Bitcoin has seen major fluctuations and a hefty stream of market investment this year. Last I looked the price per coin was at $121.5 - a missed investment on my part.
Bitcoin is now in the news daily and scores of people around the world know about it and/or have bought some. A major aspect of reporting on Bitcoin has been the illegal activity that is said to take place around it. There has been chatter in the forefront from day one about crime syndicates using Bitcoin and the companies that service Bitcoin for illegal activities, and of course the massive amount of proven illicit purchasing that takes place around the clock on deep web portals like Silk Road - which allows purchases for anything from drugs to illegal contraband - has only agitated the situation.
Does Bitcoin really attract crime syndicates that launder money?
With the recent takedown of Liberty Reserve it seems so. Officials are calling this the worlds largest money laundering case. Liberty has over 1 million users - 200K were from the US. The Justice Department says that since the founding of Liberty Reserve - 2006 - it has handled more than fifty-five million transactions,totaling more than six billion dollars.
Eastern European crime groups are big on this, it's the No.1 growth area of money laundering
So - what is the danger with Liberty Reserve?
It works like this, if you want to launder money - or send money - you would open an account with Liberty Reserve, give them any name, and an e-mail address. The key to the scheme was that users had to work through middlemen "exchangers.” Typically unregulated people in distant countries like Malaysia, Nigeria, and Vietnam, who would buy Liberty Reserves in bulk from Liberty Reserve. You would pay these guys dollars (or another currency) for Liberty Reserves. From that these reserves would be deposited into your account. When you wanted to make a withdraw, the process would be reversed - sometimes with an exchanger. Liberty Reserve itself took a one-per-cent fee and the exchangers charged five per cent or more. This way Liberty Reserve would have no identifying data for you. The deposits and withdrawals were done through exchangers.
Liberty Reserve dollars and euros - which were pegged to their respective currencies - were popular as forms of digital currency too.
A bleak outlook for libertyreserve.com. The anonymity of payments and anonymous transfer-ability of money led to their breakdown.
Away from that, it is important to note how obvious it is that the pressure is on those who accept and exchange Bitcoin.
VC money is pouring into Bitcoin related companies, and governments will have a tough time limiting the peer-to-peer system. On that, I don't think Gov has the right to regulate Bitcoin - and maybe, just maybe Bitcoin will become tied to a more stable measurement eventually, leading to the adaption of Bitcoin as an official currency in some way, and opening the door to other mathematical based virtual currencies. If any of my readers have studied monetary policy before they will know how free flow currencies operate - freely floating in the worlds largest markets, and often manipulated. How is Bitcoin one of the bad guys? There is a need for alternative currencies.