Bitcoin: the virtual currency controversy

Virtual currency, it exists in various different forms. You have gold in World of Warcraft, Lindens in Second Life and Zynga currency that works for various games such as Farmville. In 2009 a new virtual currency was started by Satoshi Nakamoto called Bitcoin. The purpose of it is for use for tangible goods and services rather than in a video game. He intended it to be a new form of non traceable, non taxable, currency that can be used for anything of value. The maximum amount of coins ever in distribution will be 20 million by 2014. As of May 16, 2011 there are just over 6 million in distribution. They are actively traded and valued on several sites with the most popular being  MT Gox. As of this writing the current price is just over 7.50 per coin. They can be purchased for U.S. dollars or they can be created using the open source Bitcoin software.  The coins take a large amount of processing power to create and unless you have a high end graphics computer then it is not worth the time to create your own. It will also cost you more than the coin is worth in electricity. The process of making the coins and the tor browser required to view most of the merchant sites are likely to deter most minors and average consumers from using Bitcoins.

On the surface this seems innocent enough. The problem is that it is gaining popularity in the United States. The use of foreign currency is already illegal under the Coinage Act of 1857 which can be found under Title 31, Subtitle IV, Chapter 51 of the United States Code (31 U.S.C. ch. 51). Not only is this already illegal in the United States but Bitcoins are already being used for illegal activity. Activities such as the purchase of drugs on the Silk Road Market (You need a tor browser to view the site.) for drugs and firearms, which openly advertises drugs such as MJ, shrooms, LSD, and X to name a few.

Bitcoins are also being used for online gambling activities which were also made illegal in the U.S.

Gambling and Drugs aside there is also the issue of the coins not being traceable or taxable which the United States would never allow. It will continue to be used illegally as long as people have an interest in it. The funds of two Bitcoin exchanges have already been frozen by Paypal. It remains to be seen if Bitcoin will end up as an underground black market payment system or it will die out due to the red tape involved in transferring funds to buy the coins. Bitcoin will definitely be something to continue to watch in the future.