Criminal Use of Bitcoin Proves its Free Market Worth

In 1988 the New York Times reported that an advanced technological threat was facing schools across the United States. What was this existential threat? Beepers (i.e., electronic pagers). School officials were dismayed by students’ use of beepers because, at the time, they were primarily used by drug dealers.

One official stated, “I can think of no reason outside of special medical emergencies for students to carry beepers.”

Also read: European Union Seeking to Ban Bitcoin in Aftermath of the Paris Terrorist Attacks

Of course, pagers were later used by many people other than drug dealers – doctors, systems administrators, even school officials – although eventually they were replaced by cell phones. But many officials in 1988 were unable to see any legitimate use of this new technology, so they reacted as officials from time immemorial have reacted when threatened: they called for a ban. We are seeing a similar pattern emerge today with Bitcoin.

Criminals are Early Adopters

Often cutting-edge technologies are first most widely used in criminal activities, and then only later go mainstream. (In this article “criminal” refers to anything that is illegal in a given country. This could range from illegal drugs to terrorism to banned religious gatherings in oppressive States. Referring to something as “criminal” in this sense says nothing regarding the morality of the action, since illegality does not always equal immorality).

Examples abound: a 1998 National Committee on Criminal Justice report noted that “drug trafficking organizations routinely surpass the communications capabilities of law enforcement. Street-level dealers and kingpins have access to the best communications technologies: E-mail, the Internet, and cellular communications have made illegal transactions more and more difficult to trace.” More recently, criminals are using drone technology. Bitcoin is following this pattern as well: Silk Road was one of the first places where Bitcoin was used extensively, and now ISIS is being accused of holding some of its funds in Bitcoin (although this is a disputed point).

Why are criminals often early adopters of technology? The free market. By definition, criminals are not bound by regulations or laws, and they are more likely to overcome institutional or cultural inertia and custom. Whatever is successful is embraced. If beepers allow drug deals to happen more efficiently, then they use beepers. If email allows criminals to communicate more effectively, then they use email. And if Bitcoin is the best way to use and transfer funds, then cryptocurrency it is. Acknowledging the early adopter use of technology by criminals does not necessarily endorse their behavior, but it does present a case study for the effectiveness of that technology.

Don’t Ban Bitcoin, But Encourage It

Unfortunately, the criminal use of technology has all too often led to government officials’ attempts to ban the technology in question, as we saw with the 1988 school officials and beepers, and we see today with recent calls to ban Bitcoin due to a purported association with ISIS terrorists. But we should learn from history the futility of this reaction. Instead of attempting to ban new technologies, societies should find ways to encourage their use by citizens. For, banning a new technology only leads to law-abiding citizens (who are the majority of people in any society) being the ones to miss out on its benefits. Imagine a world where cell phones, the Internet, and Bitcoin are banned; so many of the benefits that these technologies have brought would only be available to those who were willing to break the law. It is like the school teacher punishing the kid who behaves rather than the one who does not.

The adoption of a technology by criminals is an endorsement of its usefulness and effectiveness. For, why would someone who has no restraints on what technology he uses choose one that is ineffective and burdensome? He will use only that technology which works best. The use of Bitcoin by criminals is a perfect use case for its wider adoption throughout society and demonstrates its power to transform how financial transactions are done.

What do you think? Is the use of Bitcoin by criminals proof of its effectiveness or its dangerousness? Let us know in the comments below!

Images courtesy pixabay, morgueFile