Although the curious and suspicious looks have decreased, there are still people who associate Bitcoin (BTC) with illicit activities.
Some still judge it as the currency of crime, used to purchase illegal products and services on the internet, commit crimes or launder money.
Absence of regulation
I believe there is a confusion between the terms “unregulated” and “Illegal”. Lack of regulation does not make an activity illegal.
BTC can be considered anarchic, but anarchic doesn’t mean mess. Anarchy means statelessness or the absence of a controlling power.
Like other cryptocurrencies, Bitcoin is decentralized, meaning it doesn’t have a single regulatory body behind it to respond to it. That’s one of the advantages of currency – having a mathematical algorithm is probably more reliable than a group of self-interested people or countries to defend.
The absence of a central administrative body makes it impossible for any authority, governmental or not, to manipulate the value of the BTC or induce inflation, “printing” more notes as happens in the traditional financial system.
However, a regulation for intermediaries and users would be very welcome, and this would in no way interfere with the decentralized character of the currency, as it would make the whole system more secure and reliable.
An interesting thing would be a regulation for exchanges, which defines the responsibilities of these market actors – such as the segregation of capital from clients -, as well as the ethical lines of action.
The absence of its own regulation or laws does not nullify the existing ones either. While there was no proper tax regulation for Bitcoin, regulations for taxation on capital gains were valid, for example.
Any currency can be used to finance illegal activities. Bitcoin emerged in 2009, but crimes have been around since the world is the world.
A 2009 survey by the University of Massachusetts identified traces of cocaine on 90% of US dollar bills. In Brazil, another similar survey carried out by the Fluminense Federal University (UFF) also revealed that around 90% of the real banknotes in circulation have traces of the drug.
BTC is not anonymous as many people think. Unlike currency paper, in which all notes are equal, each Bitcoin has a kind of ID that carries all its history since the beginning of its mining. Cryptocurrencies are fully traceable.
Some famous cases of company data hijacking, which had ransoms paid in cryptocurrencies, never had their balances redeemed, as these BTCs are under constant surveillance by the authorities. The rescue would imply identifying the bad guys, and that’s because the blockchain is an open system.
A blockchain, as its name implies, is a chain of immutable blocks that store transaction information in each other. No wonder the FBI is now one of the biggest whales on the market, probably second only to Bitcoin creator Satoshi Nakamoto.
The new frightens. In the early days of the internet, the network’s associations with illicit things were also common. Bitcoin is not that new – it’s been eleven years running twenty-four hours a day, seven days a week – but many still struggle to understand how it works and the technology behind this cryptocurrency.
transact money across borders
Another common confusion I notice is that a lot of people think that sending money out of the country is illegal. I often notice in cryptocurrency discussion groups members very concerned about the possible problems they may have with the Internal Revenue Service or the Central Bank.
Sending money and earning income abroad, however, is a fundamental right according to item XV of article 5 of the Federal Constitution, which guarantees the “free movement of goods in times of peace, and anyone can enter, stay or leave it with their assets”. It is, in fact, the freedom to come and go, which not only affects people, but also their goods.
But the bureaucracy for transacting money across borders is so huge that the thought of it being illegal seems perfectly understandable.
This is one of the problems that Bitcoin solves, as its most basic function is to transfer any amount of money, anywhere in the world, without depending on the banking bureaucracy.
As it is borderless and a fast, cheap and unbureaucratic way of transacting values, Bitcoin has proven to be a potential weapon against poverty in places where the population does not have access to an organized, reliable and structured financial system.
Many have found in this cryptocurrency a way out of a series of problems typical of countries with economies heavily controlled by the government.
About the author
Marina Luz, CFP®, is an economist with 8 years of experience in the financial market and worked at Itaú BBA. He specializes in personal finance and maintains the Mais Dinheiros YouTube channel on financial education and investments