Launched in 2009 as an open-source platform with a peer-to-peer architecture, Bitcoin does not only appeal for merchants and consumers who want to have fast and efficient transactions online but also to those who are engaging in illicit activities.
Last January, two bitcoin traders accused of running unlicensed money transfers were arrested. Charlie Shrem from BitInstant.com and another trader named Robert Faiella pleaded guilty in a New York federal court after being accused of selling $1 million bitcoins to users of the Silk Road, an online drug marketplace.
The two traders exchanged almost $1 million in cash allowing users to have illegal purchases on Silk Road. Prosecutors say that the bitcoin exchange took place from December 2011 until the site was finally shut down. The traders violated the law as they failed to register their money transmitting business with the Treasury Department and that they’re involved in an illicit transaction.
Bitcoin Payment Network Poses Risks
The guilty plea of the arrested bitcoin traders made headlines. But what concerns the officials is the alarming security issue that arises with the anonymity of the payment network.
Bitcoins are used in exchange for traditional currencies. Along the convenience that it offers to users is the fact that there are also security issues and safety concerns as the payment network is also abused and misused by some for money laundering and other illegal activities.
Apart from the two traders who were arrested who pleaded guilty for transmitting money in an online black market known to be a drug haven, there are other security risks involved in using this payment network.
As a decentralized digital currency that is traded, it is not directly regulated by any agency which makes it prone to different kinds of misuse and abuse. Federal agents say that it entices criminals. Apart from unlicensed money transfers, the bitcoin system can also be misused by human traffickers, terrorists, money launderers and other criminals who want to have online monetary transfers without going through the conventional financial systems.
According to an FBI report, it is difficult to track down the identity of Bitcoin users which makes it difficult for law enforcement agencies to handle and identify suspicious users and transactions. Bitcoins are legal in the United States and there are now a lot of businesses accepting it as a form of payment.
Need for Proper Regulation
The bitcoin economy without a doubt has a lot of potential. It connects companies, businesses and individuals who can have faster means to receive and pay online. But as the bitcoin economy grows and the as the network expands with more people using bitcoins, there is also an increasing clamor to have the necessary regulation in order to protect the welfare and interest of consumers and at the same time, to deter any illegal activity. Regulating the payment network in a way that would not affect emerging bitcoin based businesses can ensure the safety and security of people using the platform for various deals and transactions.