Busting Bitcoin

Senators target virtual currency

In a June letter, Sens. Charles Schumer (D-N.Y.) and Joe Manchin (D-W.Va.) tore into Bitcoin, a private digital currency. Writing to Attorney General Eric Holder and Drug Enforcement Administration chief Michele Leonhart, the senators denounced Bitcoin because it is used on Silk Road, an online market for illicit drugs.

"The only method of payment for these illegal purchases is an untraceable peer-to-peer currency known as Bitcoins," Schumer and Manchin wrote. "After purchasing Bitcoins through an exchange, a user can create an account on Silk Road and start purchasing illegal drugs from individuals around the world and have them delivered to their homes within days." In a press statement, Manchin claimed Silk Road posed a "growing threat to all of our families," would "hurt our ability to create and save jobs," and threatened "total destruction" in West Virginia's communities.

Is Bitcoin the currency magic that makes all this destruction possible? Probably not. Its open protocols may even make it easier to track down people involved in Silk Road transactions. In an email message to reason Senior Editor Katherine Mangu-Ward, a Bitcoin developer noted that "if Silk Road truly permits deposits on their site, that makes it even easier for law enforcement to locate the 'hub' of transactions." He said people who buy drugs with Bitcoin do so at their peril: "Attempting major illicit transactions with Bitcoin, given existing statistical analysis techniques deployed in the field by law enforcement, is pretty damned dumb."