Here we go again. It didn’t take long after the Paris attacks for somebody to point the finger at Bitcoin. The digital currency was included in a list of possible methods used by ISIS and maybe other terrorist organizations to move money around. That is quite possibly the case. We have seen by their use of Facebook and Twitter that these terrorists are tech-savvy, and diversifying illicit money is, from the perspective of those involved, a sensible precaution. In fact, I would be surprised if they didn’t use some form of digital currency in some way. Even so, the stated intention of the European Union to crack down on Bitcoin in the immediate aftermath of the attacks looks more like a panicked reaction than a reasoned response.

The main methods used for financing this and other criminal operations are still cash and the banking system, but somehow in the rush to point out that Bitcoin might have been used this got overlooked by many who reported on the financing angle. Speaking as somebody who writes for a living I can understand that. We all know that fear sells and we instinctively know that people are most scared of things that they do not understand. A scary story about virtual currency, therefore, is almost bound to generate views and clicks, and addressing those fears makes the politicians look like men of action; just what the voters want to see.

Maybe that is a little too cynical. Maybe it just comes from an ignorance of the subject on the part of some who offered opinions and commentary, or even policy, and was not motivated by gain, monetary or political. In some ways that makes more sense as anybody familiar with the concept and practical applications of Bitcoin would see that, while the problems faced by criminals using Bitcoin rather than cash are different, there are still problems.

Transferring cash involves physically carrying it from one place to another. In an age when supposedly anybody is subject to searches when boarding airplanes that is not as easy as it sounds, but large bills enable cash to be smuggled regularly in large amounts, particularly by land and sea routes. The advantage to criminals, of course, is that there is no record of cash transactions; no paper trail to follow.

Bitcoin does not have that advantage; every transaction is recorded on the blockchain. What has made digital currency attractive to those same criminals, though, is that those records are anonymous. You may be able to track the Bitcoin from wallet to wallet but you cannot know whose wallets they are.

Where cash has the biggest advantage, though, is when it comes time to spend. There are very few businesses that don’t take cash, and there are also relatively few who accept Bitcoin. At some point, therefore, either the criminal group themselves or the people that they do business with exchange the virtual currency for more conventional dollars, Euros or whatever.

In fact, given that the U.S. dollar has been the currency of choice for international criminals for a long time now, dollars are probably the most likely. It is at this point that using Bitcoin becomes no more secret than using a part of the conventional banking system. Brokers, who actually make the exchange, generally know who account holders are. A more likely explanation for the use of Bitcoin among criminal gangs than anonymity is somewhat more mundane: it's cheaper than using a bank.

It is for these reasons and more that when the U.K. Treasury looked at possible risks for money laundering and funding terrorism, digital currency was evaluated as being the lowest risk of all. Cash, of course, was the highest risk level, along with accounting firms, banks and lawyers. It should be noted, however, that this report came out at a time of relative peace and security. That is in direct contradiction with the latest EU moves to crack down on Bitcoin, which have been announced with almost indecent haste.

I fully understand the desire to hit terrorists in every way we can, including making financing their murders as hard as possible. In fact, as somebody who lost a much-loved family member in the attacks of 9/11, I understand it better than most. Even so, faced with a choice between an immediate response to tragic events such as the measures that the EU are pushing for and a reasoned, calm assessment of facts such as the U.K. report I know which I would rather trust. Cracking down on Bitcoin may make some EU politicians feel better, but it will have little practical effect.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.