Like a coin spinning on a table, the future of the bitcoin is uncertain. Some see it as a wise investment opportunity and a mainstream currency of the future; to others, it is a tool for the anonymous trade of drugs, weapons, and other things you wouldn’t want on your credit card statement.
The world’s favorite crypto-currency has been making rounds in the headlines this week. On the obverse of the proverbial coin, we are about to see the world’s very first bitcoin ATM go live next Tuesday. But on the other side of the coin we see a dark underbelly: the FBI has made the largest seizure of bitcoins to date, laying charges for drug trafficking, hacking, money laundering, and even the hiring of assassins.
Let’s start by looking at the world’s first bitcoin ATM, which will be outside of a coffee shop in downtown Vancouver. The ATM is made by the Nevada-based company Robocoin. Users will be able to exchange cash for bitcoins and bitcoins for cash.
Bitcoins exist only on the internet but users have long been able to be trade them for US dollars and euros. The Vancouver ATM will be the first place where automated transactions can be made with cash.
The machine will require users to scan their palms and will limit transactions to about US$2900 per day, in order to comply with Canadian anti-money-laundering laws. A demo of the Robocoin ATM was seen in San Jose, California in May of this year, but sticky regulations in the U.S. have prevented the installation of a permanent one so far.
According to Michael Novogratz, co-chief investment officer of macro funds at Wall Street’s Fortress Investment, bitcoins can be a smart long-term investment. This may come as a surprise to those who are still hung up on the fact that bitcoin is an imaginary currency designed by anonymous hackers and not issued by any central bank.
Since bitcoin is not managed by any central authority and their supply is finite, it has been likened to standards such as gold and silver–the latter being the historical basis for the US dollar. But unlike world currencies such as the US dollar, no organization has the power to adjust its value.
Because bitcoin does not rely on any federal currency, some may consider it a potential threat to the status quo of centralized banking institutions.
As if just in time to besmirch the already confusing reputation of the bitcoin, this month the FBI has made the largest bitcoin bust ever. $28.5 million worth of bitcoins (at the current exchange) of the crypto-currency were seized from Ross Ulbricht, a.k.a. Dread Pirate Roberts, the alleged owner of the Silk Road.
The Silk Road was an online black market operating on the “Dark Web”, the hidden part of the internet where users can exchange data anonymously. Launched in February 2011 and shut down by the FBI this month, the Silk Road was a haven for trafficking illegal items, mostly drugs, using an anonymous escrow system.
According to Forbes, the FBI now controls about 174,000 bitcoins, or just over 3% of all that exist. A further 111,000 bitcoins have been tied to Ulbricth, but the FBI has been unable to seize them so far because they lack the private key that controls access to the bitcoin wallet. There may be more bitcoins tied to Ulbricht and or the Silk Road as well.
The FBI may now have the fattest bitcoin wallet of them all. According to a spokesperson, the FBI could liquidate them when the judicial process is over, as they are not illegal.
Just imagine the queue at the ATM when this happens.
Written By: K. Elsner