Shadow currency: How Bitcoin can finance terrorism

This week, the “underground” website known as “the Silk Road” made headlines when a DDoS attack brought the website’s servers crashing down. The Silk Road is known as the black market of the internet, a site where the anonymous browser can obtain a wide range of illegal substances. The site is accessible only through a Tor network (a software protocol that reroutes traffic through hundreds of servers and computers to conceal identities).

Most interestingly enough, the Silk Road’s transactions are not in dollars or euros, but in Bitcoins. Bitcoins are a decentralized electronic currency that is free from government control or interference. Recently, Bitcoins have traded as high as $260 USD, before a crash brought them back down to roughly $150 USD per coin. Libertarians and anarchists hail Bitcoin as the herald of a free, internet-based economy with minimal regulatory interference, but Bitcoin has a potentially sinister side as well.

This “crypto-currency” has already been the inspiration for several online robberies where cyber-thieves hack into a computer to steal the vital electronic information at the heart of Bitcoins. Beyond cyber-larceny, the secrecy of Bitcoin poses unique, and even frightening security challenges for a world that has yet to fully understand the problems posed by the internet age.

For example, consider the various national and international anti-money laundering statutes. These laws seek to prevent the illegal flow of currency between criminals, terrorists and other unsavory characters. But these laws require that there are actual shipments of cash between countries and criminal networks (or at the very least funds transfers between banks).

The Bitcoin protocol promises to remove the fundamental risk in money laundering: the risk of interception and detection. By using a monetary exchange like Mt.Gox, criminals can buy Bitcoins at the market rate and then they can sell to a confederate across the world at a higher price, effectuating the exchange of money. Even if Bitcoin performs poorly, it nevertheless provides an opportunity to exchange money via the anonymous P2P network. - Read more here: http://theworldoutline.com/2013/05/shadow-currency-how-bitcoin-can-finance-terrorism