I wonder how many people were already exploiting this by stealing $50 a day or something. With bitcoin it'd be nearly impossible to arrest them, right? So an unethical person would have tremendous incentive to abuse it?
If they're smart and ran the exploit via Tor -> VPN (as to not get caught by automatic Tor filters) and then took the coins through a few mixers and onto a russian exchange, they could then sweep them back into a wallet in near-complete safety.
Laundering bitcoins is challenging and risky due to the nature of the ledger - all transactions since mining must be known for all time - if you were to look at something like Monero or ZCash, things get a lot easier and you get cryptographically unbreakable anonymity rather than socially and legally difficult-to-break complexity.
The $0 case is the case where hostage taking starts to become mainstream. I'm actually shocked it isn't happening more in places like Brazil. Perhaps cyber criminals aren't smart to begin with and are (rightfully) wary of things like computers, but I expect that this will change over time. Once MPs in Canada start getting kidnapped and ransomed there will be public outrage to do something. The problem is that due to the decentralized nature the best you can hope for is to block it / make it illegal within the country. If every country does this it's value will go to 0 or just above.
The other case is where Bitcoin solves the financial problem of our time: other Governments / financial institutions can't be trusted this provides (among other things) a way of transferring $100m securely for 0 cost. It also allows individuals to avoid exponential inflation. Just an unbelievably useful service that if you make illegal before other countries and it takes off leaves your economy in much worse shape since the appreciation of the coins has gone largely to other individuals.
My pet conspiracy theory that I don't really believe, but I like to entertain, is that Bitcoin was an American intelligence operation to ensure currency dominance in an era of weakening US influence. Satoshi himself has quite a bit of Bitcoin (around 1M BTC / $100m USD) and it would be fairly easy for an NSA staffer to raise his hand in a meeting and say "Hey guys, we should mine this stuff because it will be useful for buying zero days from cyber criminals one day."
But maybe I'm giving the NSA more credit than they deserve.
Taking Bitcoin isn't the part that gets you caught, it's the spending it somewhere that does. This is often the same with real money.
Like I said, the best you can do is mixing and similar, but you know what criminals actually primarily use? Cash. Cash is fungible and untraceable. If you're going to do some hostage taking, you may as well do it for cash rather than bitcoin, the only potential benefit of bitcoin would be verification might be easier than cash.
1. Even if all states prohibit BTC (a bigg if) there will still be demand from entities not under state control (black market), especially so in ineffective countries (socialist or wartorn or with just big slums). Consequently price won't go to zero because of this.
2. The biggest threat is BTC competitors because there can be infinitely many.
As for #2, I agree that that was a bigger risk early on, but the problem with taking on a second or third currency is it leads to the question of "what stops a fourth or fifth?" it's sort of a recursive proof that could lead you to conclude that either all crypto-currencies will be worthless or one will win. Since crypto-currencies are so inherently useful they probably aren't going to 0, so now the task is finding the winner. And despite ETH being more useful in some regards, and despite Burstcoin or Peercoin having better fundamentals it seems to be that the market has centralized around Bitcoin so out of the CC that exist today, for now I'd put BTC as a 99% chance to own the market 10 years from now if there is one.