The sudden surge of the shadowy cyber-currency, Bitcoin, to record levels has intelligence and military organizations worried. Bitcoin’s meteoric rise may forecast a surge in use by terrorists, drug kingpins, white-collar criminals and Russian cybercriminals who don’t want to be tracked by law enforcement, intelligence, and military agencies. Over the past month, Bitcoin prices have risen by more than 30%. According to the CoinDesk Bitcoin Price Index, a Bitcoin traded for more than $3,000 this past weekend – a record high. This represents nearly a doubling in value in the past year.
Bitcoin’s unique power comes from its invisibility and lack of reliance on any single government for its legitimacy. Unlike regular money, digital or cryptocurrencies are not connected to banks or governments. Bitcoin is a currency that operates entirely outside of the control of banks and credit card firms. The rise in its popularity has dovetailed with criminal elements’ activity and has probably spurred its rise.
Without a doubt, an uptick in nefarious criminal business activity around the world may be occurring. The clandestine cyber-currency is the preferred method of completing criminal transactions. Recently, the US Treasury, the Department of Justice and scores of European finance law enforcement officials have thwarted operations against Russian cybercriminals. Last month, they worked together to shut down two of the dark web’s largest contraband marketplaces, AlphaBay and Hansa. The two sites sold guns, drugs, and other illegal merchandise.
Furthermore, an international financial crimes task force recently arrested Alexander Vinnik. Vinnik is a purported Russian organized crime mastermind. He is accused of laundering more than $4 billion worth of illegal funds using Bitcoin accounts operated BTC-e, one of the world’s oldest Bitcoin exchanges. His illicit dealings are alleged to include drug trafficking, public corruption, hacking, fraud, identity theft and tax refund fraud. Criminals are using Bitcoin as the conduit for such illegal activity. This has sent the currency’s value soaring to record levels.
There is certainly a dramatic uptick in cybercriminal activity. The bad actors have become more sophisticated with technology. They always seem to be one step ahead of the good guys. Cyberattacks targeting businesses around the world have increased. The ransom attacks frequently demand payment in the untraceable Bitcoin. The FBI’s Internet Crime Complaint Center reported 2,673 ransomware incidents last year – double the figure from 2014. As noted above, the doubling of crime meshes with the doubling in Bitcoin value.
Bitcoin now has an aggregate value of about $56 billion. Its effectiveness and popularity as a clandestine criminal currency have led to cyber-currency spinoffs. Other cryptocurrencies such as Ethereum and Litecoin have emerged. The total market capitalization of such digital cash is roughly $120 billion. This means that law enforcement types have a formidable task ahead of them. Cyber-currencies like Bitcoin are too big to ban. That train has already left the station. Their effort has to be in tracking and perhaps harnessing it, because it’s unlikely that they’ll ever regulate it.
Digressing for a moment from the criminal implications, many would like to know if this trend represents an investing opportunity. Famed international investor, James Rogers, is based in China. He cautions would-be Bitcoin investors of boarding this runaway train right now. Regarding Bitcoin and other cryptocurrencies, Rogers is wary due to the recent surprising surge:
“It looks bubble-ish when you see the kind of price action in Bitcoin and now you’re having new ICOs (initial coin offerings) at least one a week now and exploding when they come out – that’s bubble action.”
Of, course, it should be noted that Rogers has cried wolf many times in the last 30 years, warning of stock market bubbles and gold prices imploding. He has been wrong most of the time. If investors had listened to him from the beginning, they would have missed out on the stock market’s dramatic and almost inexorable advance over the last 30 years. He might be right about Bitcoin and other cryptocurrencies, but I wouldn’t bet on it. If governments and law enforcement can’t get a handle on the criminal transactions in Bitcoin, now may be the time to invest in it.