Virtual currency experts say Silk Road’s crisis is Bitcoin’s opportunity

TAGs: Bitcoin, bitcoin foundation, Department of Justice, Erik Voorhees, jinyoung lee englund, ross ulbricht, silk road

ross-ulbricht-silk-road-bitcoinUS federal prosecutors say Ross Ulbricht (pictured getting an early start on Movember), founder of the recently shut down Bitcoin-powered Silk Road ‘black market eBay’ site, is too great a flight risk to be granted bail. Ulbricht, who was arrested by authorities in San Francisco on Tuesday, appeared in federal court on Friday, where magistrate Joseph Spero granted Ulbricht’s lawyer’s request to push back the hearing until Wednesday (9).

Given that the criminal complaint alleges that Ulbricht used the Silk Road site to hire a hitman to dispose of an alleged blackmailer, Spero wondered what kind of odds Ulbricht’s attorney placed on his client being allowed bail. Attorney Brandon LeBlanc – reportedly a public defender – replied that his client denied all the charges made against him in the criminal complaint “and that is the end of the discussion at this point.” Does anyone else believe Ulbricht better call Saul?

With Silk Road out of the picture, its legions of vendors will have to find some other platform via which to sell their drugs, firearms, forged passports and other sketchy products. No doubt some entrepreneurial techies are already hard at work positioning their site – like Black Market Reloaded or Sheep Market – as Silk Road’s heir apparent.

Jinyoung Lee Englund, director of public affairs for the Bitcoin Foundation, told that while Silk Road clones are inevitable, it’s worth noting that the site’s demise demonstrated that Bitcoin is “not an ideal system for moving illicit funds.” Bitcoin transactions are “private, not anonymous” and Ulbricht was ultimately brought down by law enforcement using “traditional methodologies.”

Erik Voorhees, the Bitcoin advocate who sold gambling site SatoshiDice for $11.5m in July, echoed Englund’s view that the authorities had used “old fashioned police work” to take down Silk Road. Voorhees told that he hoped this demonstrated that “no new regulation is needed” to deal with the fact that illegal drugs are, you know, illegal, and thus a Bitcoin-specific crackdown is unwarranted.

Englund stressed that Bitcoin is “simply a store and medium of exchange” and “does not enable illegal activity more than cash.” The FBI itself has acknowledged that there are plenty of “known legitimate uses” for Bitcoin and Englund noted it was Ulbricht who “had to go to great lengths to provide the ‘anonymity’ he promised to his clients and vendors.”

Predictably, Silk Road’s shutdown led to a steep plunge in Bitcoin’s value, but savvy investors were quick to capitalize on the media panic, to the point that Bitcoin’s value relative to the US dollar has already rebounded close to where it was prior to the crash. Voorhees believes “predicting prices is a fool’s errand,” but noted that the flurry of negative press only managed to depress Bitcoin’s value to “prices from about a month or two ago.” Englund agreed that the long-term financial fallout would likely be minimal, given that Silk Road’s activities “amounted to about 4% of the daily traded volume.”

Both Englund and Voorhees also see plenty of public relations opportunities for Bitcoin in Silk Road’s comeuppance. Englund pointed out that venture capitalists had invested $12m into legitimate Bitcoin startups in the three months ending June 30 and he expects that figure to grow now that Silk Road is “no longer grabbing headlines.”

Englund says the next few months will allow Bitcoin advocates to promote the many opportunities Bitcoin has to offer online commerce, including “a remittance lifeline for diaspora populations and financial inclusion of the global south.” Voorhees said “former critics will observe that this technology is not primarily about scoring drugs on the internet – it’s about the ability to store and transfer value without relying on corrupt institutions, and more generally about the fundamental right of all people to protect their private property.”


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