In May 2013, Liberty Reserve, a centralized digital currency service that allowed users to register and transfer money to other users with only a name, e-mail address, and birth date, was shut down by United States federal prosecutors under the Patriot Act after an investigation by authorities across 17 countries. On January 2016, the central figure, Arthur Budovsky pleaded guilty to one count of conspiring to commit money laundering and on May 6, 2016, Budovsky was sentenced to 20 years of prison. The site had over a million users when it was shut down by the United States government and US legalites argued that due to lax security, alleged criminal activity largely went undetected, which ultimately led to them seizing the service.
Bitcoin was the central currency on Silk Road, the infamous and anonymous marketplace that was only accessible over the TOR anonymous browsing network on the deep web, and which was closed by the FBI in October 2013. Silk Road was a haven for drug sales, hitment, dodgy porn and other illegal goods.
This prompted US Senator Charles Schumer to call for the site to be shut down, explicitly linking it to bitcoin, which he called a “surrogate currency” and then the US DEA seized bitcoins from a US resident for purchasing a controlled substance in June 2013.
In August 2013, 22 bitcoin companies involved in bitcoin were subpoenaed by the state of New York, a US judge ruled that bitcoin is a form of money; and the Bitcoin Foundation received a cease and desist letter from the state of California.
Spin three years into the future and turn to a recent article in Newsweek, Leah McGrath Goodman reports that hundreds of experts inside the nation’s defense and intelligence agencies, as well as private-sector researchers in finance, technology and various think tanks across the country—some of them under contract with the U.S. government—are now investigating how virtual currencies could undermine America’s long-standing ability to disrupt the financial networks of its foes and even permanently upend parts of the global financial system.
“There is a real danger and a challenge here with respect to virtual currencies,” says Juan Zarate, a senior adviser at Washington think tank Center for Strategic and International Studies and on the board of advisers for San Francisco’s Coinbase, one of the most popular virtual currency exchanges in the world. “And it runs contrary to the very fundamentals of the transparency and accountability that we’ve tried to build for the last three decades to tackle terrorism, human trafficking, money-laundering and many other types of criminal activity.”
In 2003, Zarate led an elite team at the U.S. Department of the Treasury who engineered the model used today to target, block and freeze the finances of America’s enemies through their personal bank accounts—from Iranian money launderers to cronies of Russian President Vladimir Putin. This is how it works: Treasury’s Office of Terrorist Financing and Financial Crimes puts individuals and organizations on a blacklist, which is sent out to the world. Once on the blacklist, those targeted can no longer do business in U.S. dollars, which are involved in roughly 88 percent of the world’s foreign-exchange transactions, according to Switzerland’s Bank for International Settlements. In other words, they cannot bank at most financial institutions.
This ability to financially disrupt, disable and dismantle nefarious networks, is crucial to U.S. national security, Treasury officials say. It has proven effective for more than a decade and is often strongly preferable to deploying troops. “We have made it very difficult for members of the Islamic State to raise or move money around the world these days,” Zarate says. “Even Iran had a hard time finding safe havens.” In fact, years of financial pressure from the U.S. and its allies helped force Iran to negotiate with the White House and sign a landmark nuclear deal last year.
The biggest concern the U.S. has about virtual currencies, Zarate says, is that terrorists and other enemies might create one so powerful and so untrackable, that they’ll no longer need the global banking system, which the U.S. uses to financially starve them. This has yet to happen, but America’s defense and intelligence agencies are already trying to figure out how they might infiltrate or block such a malicious financial network.
Computer Sciences has hired hundreds of technologists and experts across the banking, insurance and health care sectors to examine how to “scale up” Blockchain technology for faster banking, trading, clearing and settlements. With all the trepidation bitcoin has brought, it’s underlying framework, the Blockchain, has begun to spread like wildfire as more and more imagineers, developers, scientists, cryptographers, mathematicians etc. begin to build new concepts around the decentralisation of trust itself, which Satoshi Nakamoti, the founder of bitcoin revolutionised.
The more projects built on top of cryptocurrencies such as bitcoin and ethereum, the more complicated it will become for any authorities to take them down. If that’s even possible.
Bala Venkataraman, global chief technology officer of banking and capital markets for Computer Sciences Corp., a digital information-technology company whose sister firm, CSRA Inc., runs the IT backbone of the National Security Agency (NSA) comments:
“In a cryptocurrency world, you know who becomes the bank?” he asks. “You and I. You become not just the bank, but the central bank. And that can have enormous ramifications for things like sovereign authority. By 2040, I think we may be fully transitioned over to cryptocurrency. I don’t think anyone can stop it from happening.”
“With the introduction of Blockchain, a disruption of the global banking system is inevitable,” he added in the article.
No one can stop it from happening? No one except the Americans perhaps – and very likely under the banner of Homeland Security and the Patriot Act.
One significant terrorist act on US soil, alleged or proven to be funded by Bitcoin or another cryptocurrency is very likely all it will take.
Benjamin Franklin once wrote:
“Those who would give up essential Liberty, to purchase a little temporary Safety, deserve neither Liberty nor Safety.”
With it’s 12 billion dollar market cap, bitcoin is nowhere near a trade threat to the U.S. dollar with its busiest week near a tiny $2 million, compared with the massive $14 trillion of average daily U.S. dollar transactions.
But it does pose a bigger threat – and that’s it’s threat to sovereign authority – or the power power of the state to regulate the monetary system and as such, the value and credibility of a sovereign currency are intrinsically linked with the ability of the state to support that currency, on which the the legal concept of money is also based on.
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- Peter Vessenes Announces Deluge Network To Support a Safe and Direct Way to Contribute Bitcoin Directly to ICOs - December 5, 2017
- EXMO Launches Token Sale with Blockstarter’s ICO Solution - December 5, 2017
- AdHive, A Blockchain-Based Native Advertising Platform, Engages with WINGS DAO Platform - December 5, 2017
- Perkins Coie Adds SEC Attorney in San Francisco with Fintech and Blockchain Experience - December 5, 2017
- Cryptocurrency Monero Announces Breakthrough Online Shopping Initiative Featuring Top Global Artists’ Music and Merchandise - December 5, 2017
- Bitcoin for a ‘bit’ of Caribbean paradise - December 5, 2017
- With the Launch of SunCoin, Solar Bankers Takes On the World’s Energy Giants - December 4, 2017
- Blockchain News Is Merging With Token Report - November 30, 2017
- Mira launches Pre-ICO for Mira – an Easy and Convenient Way to Buy, Store and Send Cryptocurrency - November 23, 2017
- Dash and KuvaCash Partner to Fight Inflation in Zimbabwe with Cryptocurrency - November 22, 2017
- INS Ecosystem Partners with Ambrosus to Overhaul the Grocery Supply Chain - November 22, 2017
- Global Debt Registry Unveils Collateral Pledge Blockchain Proof of Concept - November 22, 2017
- Ripple Appoints Former New York State Superintendent of Financial Services Benjamin Lawsky to Its Board and Ron Will as CFO - November 22, 2017
- Advised by the Co-Founders of YouTube and Twitch, Theta Announces a Blockchain-based Video Delivery Network - November 22, 2017
- Modex adds top advisor from Google ahead of ICO - November 22, 2017
- Decentralized Ad Exchange AdEx Partners with INK to Handle the World’s First Blockchain-based Ad Auction - November 22, 2017
- Zilliqa Lowers Funding Cap Despite Heavy Demand from Investors - November 22, 2017
- Health Startup Etheal Combines Blockchain Technology with Micro-Incentives to Build a Peer-Reviewed Global List of Health Professionals - November 22, 2017
- Bitquence Rebrands as Ethos.io, Charting a Course to Unlock Crypto and the Future of Investment for the Masses - November 22, 2017
- Eidoo Introduces User Friendly ICO Engine – Allowing Crypto Startups To Launch And Manage Their Own ICOs For Fundraising On The Blockchain - November 22, 2017
- Simdaq Launches Social Platform for Democratisation and Development of Cryptocurrency Trading - November 22, 2017
- Gameflip Shatters FLIP Pre-Sale Goals, Sets Sights on December 4, 2017 ICO - November 22, 2017
- Golden Alliance Gold Mining Launches Token Sale - November 22, 2017
- Genaro and Storj Labs Announce Collaboration and Product Integration - November 22, 2017
- Metal (MTL) Now Available on the Chinese Cryptocurrency Exchange - November 22, 2017
- Mark.space & Jaguar Land Rover Announce Cooperation - November 22, 2017
- Exscudo – EON Testnet Was Successfully Updated - November 22, 2017
- Valorem Foundation Launches All-new Cryptocurrency Platform - November 22, 2017
- WAX Partners with Xsolla to Offer Its Platform to More Than 2,000 Video Games - November 22, 2017
- Brave expands Basic Attention Token platform to YouTube - November 22, 2017
- Narrative Launches Blockchain Based Social Network That Puts Revenue In Your Pocket, Not Mark Zuckerberg’s - November 22, 2017
- Gladius Uses Blockchain and Spare Bandwidth to Revolutionize Cyber Security - November 22, 2017
- Indorse Announces Partnership with App Store Cryptocurrency, AppCoins, ahead of MVP Launch - November 22, 2017
- Secutix And The Paléo Festival Nyon Announce The Success Of Their Blockchain Pilot Project - November 22, 2017
- ING launches major addition to blockchain technology: Zero-Knowledge Range Proof solution - November 22, 2017
- Cofound.it Announces Teams Participating in Upcoming Live Crowdsale Event - November 22, 2017
- PUBLIQ goes public: The blockchain and AI company that fights fake news announces the start of its Initial Token Offering - November 22, 2017
- Blockchain for Business SophiaTX Reveals New Details of Platform; Confirms Date for Token Generation Event - November 22, 2017
- BCShop.io Launches Partner Program - November 22, 2017
- World’s First Social Entrepreneurship Platform Moms Avenue Challenges Etsy by Gearing Up With Blockchain - November 21, 2017
- WAX Partners with Xsolla to Offer Its Platform to More Than 2,000 Video Games - November 20, 2017
- Pundi X integrates NEM blockchain to Bring Cryptocurrency Payments Into Retail Stores - November 20, 2017
- Fujitsu Develops Security Technology to Safely Connect Blockchains - November 20, 2017
- Jibrel Network Announces a Highly Successful Pre-sale Round - November 20, 2017
- KRAFTWERK on Blockchain - November 20, 2017
- MintHealth: Empowering Patients to Take Control of their Health and Data via Blockchain Technology - November 20, 2017
- IBM Completes PoC Of Blockchain-based Shared KYC With Deutsche Bank, HSBC, MUFG And Cargill, IBM Treasuries - November 20, 2017
- LetsEnhance.io to process images on Neuromation Platform - November 20, 2017
- Blockchain And AI Researchers Propose A New Model To Return The Control Over Human Life Data To The Patients And Accelerate Biomedical Research - November 20, 2017