Mark Warburton (Global) - Bitcoin: a Virtual Currency for the Future? part 2

Buying and selling Bitcoins
Paypal has taken the lead (with credit card companies eager to follow) by going out of their way to make it illegal to sell Bitcoins. PayPal's terms of service prohibit currency exchange, and its owners are worried by Bitcoin's fluidity to do just that. For instance, measures were taken against CoinPal, a user of the currency, as their PayPal account was frozen by the anti-fraud department. As it becomes more difficult to spend Bitcoins, they may be forced underground; used as a decoy currency for bartering illegal services in the real world.

Envisage a dystopian future where Euros are traded for Bitcoins, which are then sent to a middle-man that moves them on to an escort agency or a drug dealer. Due to the restrictions that are being put upon it, then, this particularly unique form of liquid capital could well become a tool for criminal middle-men that is stealthy and difficult to trace.

Bitcoin - what the future holds

There are a number of problems Bitcoin could encounter in the long run. Something as simple as a sudden decline in the user base, or the discovery of a flaw that is quickly pounced upon by hackers could turn it on its head. In June 2011, Symantec warned about the possibility of botnets engaging in furtive ‘mining' of Bitcoins. Botnets can effectively use the resources of other people's computers to generate Bitcoins. This can be set up via malware that plants Bitcoin miners on infected computers. Of course a flat out global crackdown on Bitcoin's software isn't implausible either. Even its own developers have said that,

"We are working with the government to make sure indeed the long arm of the government can reach Bitcoins..... the only way Bitcoins are going to be successful is working with regulation and with the government."

Anonymity is not guaranteed either. Given the extent in which governments are transposing our tangible surveillance to the virtual world, existing statistical analysis techniques will be deployed by law enforcement agencies to track black market activity and crackers. If the U.S. government decides to treat it as private currency, then it could be subjected to all kinds of strict regulation - such as the need to integrate with the taxation system, or forced exchange into U.S. currency if it reaches specific rates.

All of this is compounded by the sensationalist-prone news that WikiLeaks is accepting Bitcoin donations. Bitcoin cannot have its transfers blocked or its circulation frozen (for now). Both of these problems have struck WikiLeaks in the last six months, as Visa, Mastercard, and Bank of America have all cut off donations to the group and PayPal has frozen WikiLeaks-associated funds - hence a turn to Bitcoin.

For all our common sense views that capital and technology are transparent, predictable ‘things', it is evident that the fate of Bitcoin is anything but obvious. Like real-world capital, virtual money finds its own logic in the opening up of financial possibilities, ethical or not. Pressing down hard on virtual money might not kill it outright - it may well find a way out of its immediate incarnation. Bitcoins are still, at the moment, real enough to be identified as currency exchange for the Euro and Dollar and other virtual currency. There might be a traversing of one e-currency into another, or even a mutation of something previously thought of as finished. The fact remains that Bitcoin has turned heads in its radical nature. Even if it might not be here to stay, it has set the standard for alternative modes of virtual currency in its temerity and cross-spectrum political ethos (sharing both libertarian and holistic traits).

By Mark Warburton, editorial asssitant, IDG Connect


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