While cryptocurrency’s reputation as a conduit for buying drugs and laundering money are being steadily usurped by its role as a speculative asset (or inklings that it may end up actually being a useful payment platform), in actuality it is still being used prodigiously to avoid taxes, get around sanctions, and in 2018 the use of Bitcoin on darknet markets actually doubled. Crypto’s troubled past is by no means over, and is in fact growing along with its mainstream acceptance.
Forbes today published an article which noted that while speculation is currently the predominant use of cryptocurrency, it is not even the majority use. In fact, a plurality of crypto transactions are more in a gray area or are patently illegal.
Read more: McAfee: “Privacy coins will obsolete income taxes”
Tax evasion and the avoidance of international sanctions have turned out to be a popular use for crypto. According to Telegraph an economist in the Kremlin explicitly stated that Russia will invest in Bitcoin in order to avoid US sanctions, and many have predicted the same for Iran, which is creating its own centrally-backed cryptocoin. A recent report by Ciphertrace detailed that cryptocurrency, especially in countries with weak anti-money laundering regulation, has been an absolute boon for criminals or those who are attempting to avoid paying taxes.
According to Reuters, the use of Bitcoin to buy drugs, fake IDs, or pornography has in fact doubled throughout last year. Utilizing Bitcoin, about $2 Million flows into various darknet marketplaces each day.
The bottom line is that people are using Bitcoin where it is useful, and they aren’t using it where it is useless. Bitcoin’s volatility makes it an attractive investment for day traders or speculators, who attempt to buy it at a low point and sell it when it becomes more valuable. On the other hand, its ability to help make transactions anonymous make it useful to avoid government regulations and taxes. This leaves out what people claim makes crypto so valuable- a way to revolutionize the financial system and introduce a new way to exchange money, which is alienated by the intense volatility which Bitcoin and other cryptocurrencies have been contending with.
Chainanalysis makes a great point: bitcoin doesn’t care about legality or illegality of human action. It’s useful, and so its usage is growing.
— Yuri de Gaia (@Y_deGaia) January 19, 2019
Bitcoin is solving its stability problem slowly but surely, with volatility at an all time low of late. Still, its worth noting that even if crypto can become a stable store of value, it still has a long way to go before it can become a competitor to centrally backed fiat currency. It has issues of scaling transactions and usability to contend with, along with security. Even if these issues can be tackled, its hard to imagine that darknet transactions, tax avoidance, and skirting regulation will suddenly go away. In fact, as crypto solves its basic problems and improves as a currency, its use as a vehicle for illegal activity will only rise.
While many crypto traders actually do not care about who uses crypto or what they use it for, the reality is that companies who want to make money off crypto are motivated to stay in the good graces of government. This means that even as Bitcoin becomes more stable, expect that exchanges, those who provide wallets, and other crypto companies will likely expand their cooperation with governments and introduce increased KYC and AML procedures.