The Silk Road, an ancient trade route connecting China with the western world, has been credited with dawning an era of discovery, communication and the exchange of goods and knowledge between the eastern and western worlds (Britannica, 2018). Centuries later, this aura served as the springboard for an anonymous global exchange online system that would be free of regulation and would connect buyers and sellers of so called victimless-crime related goods and services. The mysterious 29-year-old founder and proprietor of the online Silk Road anonymous marketplace site, known as Dread Pirate Roberts and later identified as Ross Ulbricht, staunchly decried government control and created the site to undermine “the very fabric of the state… and to use economic theory as a means to abolish the use and coercion and aggression among mankind” (Blockonomi, 2018, para 7). Ulbricht would eventually be convicted and sentenced to life in prison for an assortment of charges including money laundering, drug king pinning, computer hacking and a variety of related charges; in late 2017 he lost an appeal to reduce his mandatory, no parole, life sentence (Wired, 2017).
Utilizing the unindexed and deep web with such tools as Tor (The Onion Router), a software program originally developed by the US Navy to facilitate anonymous online communication, the Silk Road utilized cryptocurrency, specifically bitcoin, to conduct its business transactions among its marketplace buyers and sellers.
During its three-year run, the main commodity for sale on the Silk Road was illicit drugs as evidenced by the 13,000 listings for drugs on the site in September of 2013 (Mashable, 2013). The numbers associated with the Silk Road are staggering – 9,519,664 Bitcoins , equivalent to $1.2 billion, in sales; over 1,229,465 completed transactions on the site and 18,205, 507 Bitcoins balance in the Silk Road escrow account which is equivalent to $2,548, 770 when the accounts were seized in late 2013 (Mashable, 2013).
The Silk Road’s use of cryptocurrency, in the manner of bitcoins, has also emerged as the currency of choice for other nefarious dealings beyond the illicit drug trade. Bitcoin’s growth has alarmed defense and intelligence agencies who fear its increasing use by “…terrorists, drug kingpins, white-collar criminals and Russian cybercriminals who do not want to be tracked by the world’s governments” (Washington Times, 2017), para 1).
Bitcoin’s structured blockchain technology offers potential wrongdoers and cybercriminals with two distinct advantages: the decentralized person-to-person transactions, sans the regulation and oversight of established financial institutions such as banks, provides near total transaction anonymity and the Bitcoin account digital wallets, identifiable only by a number, can serve to facilitate both legitimate and illegit transactions. The increase in the use of Bitcoins in mainstream retail establishments and even in the real estate market where the first known Bitcoin-exclusive real estate deal recently closed in Miami, Fl (The Real Deal, 2017), continue to push the legitimacy of Bitcoin.
Recent cyberattacks, such as the WannaCry ransomware attack, coupled with cyber threat and extortion cases demanding payment in Bitcoins continue to cloud the legitimacy of cryptocurrencies. However, the momentum towards full legitimacy of Bitcoins continues to move forward. John Bohannon (Science, 2016) counsels that the wide majority of Bitcoin users are “…law-abiding people motivated by privacy concerns or just curiosity” (para 3). Cryptocurrency ATMs, where Bitcoins can be exchanged for cash, are appearing in major cities and “… Bitcoin’s market capitalization, a measure of the amount of money invested in it, stood at $5.6 billion” (Science, 2016, para 11) in 2016 and has now exceeded $300 billion in early 2018 (Seeking Alpha, 2018).
With the conviction of Ulbricht and other major cryptocurrency cybercriminals, the mantra of total anonymity for cryptocurrencies has been lifted by the FBI and other international law enforcement agencies. Law enforcement proactively tracks and investigates crypto currencies and their usage on the black markets. Globally, nations such as Japan and Australia, have recently enacted cryptocurrency regulatory frameworks to license cryptocurrency exchanges and to report potential illegal cryptocurrency activities. United States Securities and Exchange Commission (SEC) Chairman John Clayton has warned that initial coin offerings are subject to SEC regulations (The Verge, 2018). Clayton advised that many initial Bitcoin offerings are “…being conducted illegally… and those who engage in semantic gymnastics or elaborate structuring exercises in an effort to avoid having a coin be a security, are squarely in the crosshairs of our enforcement provision” (The Verge, 2018, para 3).
Bitcoin has traveled a long way from its original mission to create a decentralized online currency, through the sinewy underworld of the Silk Road and cybercriminals, to its current popularity on the international mainstream cryptocurrency playing field. Only time will tell if Bitcoin and cryptocurrencies will shed their dark reputations and become a part of the mainstream financial ecosystem or if they will hold steadfast to the anonymity that they were founded upon.
Dr. Hector R Garcia is a 30+ year public safety professional who has worked both domestically and internationally in the fields of leadership development, law enforcement, safety and security. Dr. Garcia serves as a subject matter expert and police adviser for the US Department of State, Bureau of International Narcotics and Law Enforcement Affairs in the Central America and Africa regions.
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