February 23, 2015

Dark Dollar Dealings

William Luther

Associate Professor of Economics, Florida Atlantic University
Summary

The government would be mistaken to discourage monetary competition on the grounds that some bitcoin users will purchase illicit goods or avoid paying taxes. It would also be hypocritical, for the dollar is still the criminal’s currency of choice. So long as the United States continues to produce cash — and $100 bills, in particular — it has no business regulating bitcoin.

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Yes, bitcoin helps illicit business dealings. But so does the $100 bill.

A U.S. District Court jury in Manhattan recently found Ross William Ulbricht guilty of seven charges, including narcotics conspiracy, engaging in a continuing criminal enterprise, conspiracy to commit computer hacking and money laundering conspiracy. Ulbricht is the founder of the Silk Road, an online marketplace where drugs and other illegal goods were listed for sale. The site was instrumental in the early success of the digital currency bitcoin. Ulbricht, who awaits sentencing in May, faces 20 years to life in prison.

The Silk Road, which Gawker described as “the Amazon of drugs,” launched in February 2011. A 2013 study by Nicolas Christin, assistant research professor at Carnegie Mellon University, confirmed that more than half of all items listed for sale on the site were illegal substances and that nearly half of all sellers were willing to ship goods anywhere in the world. Evidence presented at trial suggests the site generated more than $213 million in revenue. It was shut down in October 2013, after Ulbricht’s arrest.

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