Bitcoin Continues to Gain Traction

The recent auction of Bitcoin seized by the US Marshall’s Office from the infamous online market place the Silk Road has brought issues and discussion about Bitcoin to the forefront of the media once again. Often times this discussion continues to be about the legitimacy and the legality of Bitcoin. This is no surprise given the fact that when the words Bitcoin and the Silk Road are mentioned at the same time, the discussion often portrays Bitcoin in a bad light, especially as one of the the primary purposes of the Silk Road was to serve as a venue in which illegal narcotics could be bought and sold using the untraceable crypto-currency. This fact tarnished the legitimacy of the currency as it caused, and may continue to cause, many to associate the crypto-currency with illegal activity. Yet, though this is the history of the situation, recent developments in the Bitcoin auction as well as the on-going Silk Road lawsuit can actually be seen as beneficial to Bitcoin.

One of the biggest recent developments is that the auction of the seized Bitcoin illustrates that the government sees an inherent value in the crytpo-currency. That is, the way in which the government decided to auction of the currency shows that they realize it has inherent value, and they did not just merely write it off as an “internet fad”. Further, the fact that the winner of the auction was venture capitalist Tim Draper also greatly benefits Bitcoin. His decision to hold the Bitcoin helped to ensure that the market was not flooded with an over-abundance of supply, causing the price to drop. His plan on what to do with it will also help expand Bitcoin’s use and legitimacy. According to The New York Times:

But the winner, the venture capitalist Tim Draper, is not seeking a quick hit. Instead, through a partnership with the Bitcoin exchange start-up Vaurum, Mr. Draper intends to make the coins available for use in emerging markets.

“With the help of Vaurum and this newly purchased Bitcoin, we expect to be able to create new services that can provide liquidity and confidence to markets that have been hamstrung by weak currencies,” Mr. Draper said in a statement through Vaurum. “We want to enable people to hold and trade Bitcoin to secure themselves against weakening currencies.”

This has the potential to expand Bitcoin into a more global, and more widely accepted form of payment. In turn, this will help the currency to continue its move up the legitimacy ladder.

Further, there has recently been information released about the current rulings against Ulbricht and the Silk Road. Accordingly to the technology magazine Wired:

The government and legal community may still be arguing over whether bitcoin can be defined as “money.” But the judge presiding over the landmark Silk Road drug case has declared that it’s at least close enough to get you locked up for money laundering.

In a ruling released Wednesday, Judge Katherine Forrest denied a motion by Ross Ulbricht, the 30-year-old alleged creator of the Silk Road billion-dollar online drug bazaar, to dismiss all criminal charges against him. Those charges include narcotics trafficking conspiracy, money laundering, and hacking conspiracy charges, as well as a “continuing criminal enterprise” charge that’s better known as the “kingpin” statute used to prosecute criminal gang and cartel leaders.

The fact that the judge in this case appears to be taking a hardline approach is actually very beneficial for Bitcoin. First, by ensuring that Ulbricht and Silk Road are tried for their alleged criminal activity, this legal case is further creating the important distinction between Bitcoin and its potential illegal uses. This is an important step in Bitcoin’s growth. Second, by accepting that BItcoin is not “money” but that is “close enough” to money, this case shows an important step forward in the legitimacy of the crypto-currency in the eyes of the government as they accept it has inherent value. This, coupled with the auction mentioned above, no doubt signals a growth in legitimacy.

Thus, what does all of this mean for consumers? One of the biggest arguments is that the continued prosecution of the Silk Road will continue to further separate the technology of Bitcoin from its illicit past. This was actually an argument that was made some months ago, yet it bears repeating.

Yet, perhaps more importantly for American consumers, recent events, such as those mentioned above, have shown that the U.S. Government is becoming more and more familiar with Bitcoin as a legitimate force. This means that American consumers can feel more comfortable about using Bitcoin, as it has lost much of the stigma that was originally associated with it. In turn, this has the potential to allow Bitcoin to expand as a legitimate tool to be used by the modern consumer. Some argue that this could change the way in which daily transactions are carried out in America in the near future.

Read More-“Juge Shoots Down ‘Bitcoin Isn’t Money’ Argument in Silk Road Case” (Andy Greenberg, Wired)

Read More- “Winner of Bitcoin Auction, Tim Draper, Plans to Expand Currency’s Use” (Sydney Ember, The New York Times)

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A rising senior at Colgate University, John is currently working as a research fellow with Consumers' Research.

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