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Comment by Snackchez | Hacker News Reader

>“All it would take would be one terrorist incident in the U.S. funded by bitcoin for the U.S. regulator to much more seriously step in and take action, he said. “That’s a risk, an unquantifiable risk, bitcoin has that another currency doesn’t."

You can't make this up... or maybe I'm not understanding something. So, what's currently funding terrorist attacks?

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I don't understand the comment either.

It's not like terrorist groups are currently un-funded. Cash is still king around illegal activities of all kinds. Why is using bitcoin for illegal activity any different than untraceable cash?

Your points are valid, but I think you're misunderstanding his point. If a terrorist attack happened that was funded via Bitcoin, and could've only been funded via Bitcoin (including a false-flag) the governments would throw the book at it. This could be terrorist groups sending BTC to legit US citizens who purchase things (like weapons) legally and then use them in an attack, &c.

The "could've only been funded via Bitcoin" part isn't even necessary. The US government is kind of crazy when it comes to terrorism. Any connection between Bitcoin and terrorism that gets a lot of public attention is likely to result in major legal problems. It doesn't matter whether or not the fear is well founded or whether Bitcoin's role was incidental. Look at how much pressure there is to crack down on encryption in general, and that would have far wider-reaching consequences than regulating a cryptocurrency only a tiny percentage of people actually use.

That bit about the false flag has me thinking. Has that possibility been seriously discussed?

He's not arguing that Bitcoin would be responsible for the terrorist action. He's arguing that hysteria would hold Bitcoin accountable. And this would create pressure to pass legislation that would crack down on it.

And deserved or not Bitcoin is perceived differently than cash. Its seen as something nefarious, and strange. Where cash is something familiar.

The irony of course being that the US has even bombed USD cash reserves of ISIS. The USD network funds plenty of unscrupulous acts. It's a shame that people won't be able to see that equivalency though. When regulators come after Bitcoin, it will be from a conflict of interest, not a moral high ground.

To play devil's advocate: cash (fiat in general) is often traceable to bank accounts, wire transfers, ATM CCTV, credit card records, marked bank notes, etc.

While it's still v possible to track a bitcoin transaction from recipient to sender, there are countermeasures with varying degrees of efficacy. At any rate, it's not the traceability of X per se that matters, but rather the stigma, and given how many billions of $ in illegal activity bitcoin has been used for, and the high-profile cases of Silk Road etc, it's very easy to see that scenario (i.e., the US Congress + interested lobbyists cracking down on Crypto) happening.

I'm going to take the cynical view here. The issue is that there are rules around movement and use of cash that are clear that banks can follow to say 'not my fault' when terrorists use cash. No one knows what's illegal and legal for the movement of bitcoins. No one knows what compliance they need. How does investing in a currency where the regulations are likely to dramatically and suddenly increase in certain unpredictable ways play out? Can regulatory changes cause a huge amount of volatility and downward pressure?

One of the big pluses to bitcoin is the fact that you can move large amounts of money relatively quickly instead of relying on banks.

Illegal operations would obviously not rely on banks.

HSBC and Wachovia were recently involved in the laundering of hundreds of billions of dollars for Mexico's biggest drug cartel (and pretty much every executive involved came out unscathed once it was revealed).

https://www.theguardian.com/commentisfree/2015/feb/15/hsbc-h...

I think you would surprise yourself with that comment. Illegal operations do indeed rely heavily on banks.

> Illegal operations do indeed rely heavily on banks.

https://www.reuters.com/article/us-hsbc-probe/hsbc-became-ba...

As an example for anyone not familiar with these types of stories.

When I bought drugs in high school, it was usually in cash. Sure, I concede multi-million dollar operations may have bank help, but I don't think you're thinking about the full picture.

Don't be so sure...

is that different than cash - especially surrounding illegally obtained cash?

I'm not saying it's not a risk - I just don't see it as inherently more risky than currently viable currencies.

One big difference is that cash is too popular to ban entirely. If a major attack were somehow linked to Bitcoin, the US government could make the whole thing illegal. We all know that wouldn't do much to actually stop terrorist attacks, but it would be a major problem for a wealth manager trying to operate within the law, and being ineffective certainly hasn't stopped the US government from passing dumb anti-terror laws in the past.

I think the point is that bitcoin is very fragile and any powerful enough state-actor can bash it to the ground. There are various ways to achieve this, from shorting to propaganda, to attacking (hacking) large exchanges or miner networks and so on. Only time will tell of course, maybe that is already priced in.

Easier: make exchanging bitcoin for real money illegal.

You’d have to make the inverse of that transaction illegal as well. If you banned me from exchanging BTC for USD that wouldn’t stop he from buying more BTC nor using it to purchase things.

Fail to see how is Bitcoin fragile. It has been running non stop for past 8 years churning out a block every 10 minutes without fail while being under constant attack from hackers, governments, it has its own internal governance issues, hard forks, technical issues, scaling debates. And yet it is growing in liquidity and scale. I doubt state actors can do anything about it.

> I doubt state actors can do anything about it

This attitude is what I see as Bitcoin's primary risk factory. It's a culture of arrogance that reminds me of pre-crisis finance, when it was popular to say things like "the Federal Reserve chairman is more powerful than the U.S President."

He's saying it's fragile in that the US Government could ban it and the value of the coin disappears overnight.

It's very easy to ban - make it illegal to sell Bitcoin, force ISPs to block international sites that do.

Actually it is not that easy to ban.

The Bitcoin code is open source. Anyone from anywhere can download the code and run a local copy. Your coins are securely stored across computers all over the world. Your balance cannot be frozen by any authority. Maybe central exchanges that convert fiat to Bitcoin could be regulated, but mining cannot be stopped, transactions cannot be stopped. Unless governments all over the world shut down electricity and internet.

At that point question mark is on the government that does this rather than Bitcoin.

> Your coins are securely stored across computers all over the world.

Please lets not start this debate. Times and times again it has been proven that software is not secure. OpenSSL was also thought to be secure for quite some time too..

Agreed. In this case there is an implicit, very large, bug bounty that anyone can cash in. So far there has been one creation of new bitcoin bug and zero spending other people's bitcoin bugs.

That does not mean it's secure, but at this point it's looking more secure every day.

The more centralized bitcoin becomes, and it will, the more vulnerable it will be. As time goes by a few exchanges will become huge BTC storage centers. What if it’s an inside attack and someone steals the data from the servers? Is there any insurance/rollback mechanism in place?

Unless you can pay taxes in Bitcoin, people will always need to be able to convert Bitcoin to fiat.

Bitcoin itself cannot be stopped, but it's utility as a currency (or, as it is now, a speculative investment) can be.

The same thing could be/could have been said about the internet as a whole.

The internet like several large systems people depend on were created by major institutions for major institutions and any attack on them would weaken the institution doing the attacking. Bitcoin however, was created mainly to circumvent major institutions, so they have no vested interest in protecting it unless there exists 3rd party grassroots pressure to do so.

Big difference is that Bitcoin has all the right conditions for a bubble pop. If someone did a 51% attack, this would cause people to lose trust in the currency, everyone would cash out, creating a bank run, which would be a self-accelerating process that drives the price even lower. So even if the network recovered the next day, it would take a long long time to rebuild that trust.

Whereas with the internet, if someone is able to knock out critical infrastructure one day, engineers would figure out a way to fix/reroute it, get it working a few days later, and everyone would happily log back on as soon as it's working. Although maybe they would throw out their "smart" coffee machines and etc.

I disagree that everyone would cash out.

There have been crashes of bitcoin before. None "to zero" but pretty substantial, and not everyone "cashes out" right away.

Sure you're right, some people would stay invested, some people would even re-invest during the price drop (dead cat bounce).

But the previous crashes weren't caused by any real news of a significant weakness of Bitcoin, so if there was news like that, then the crash would be worse than we've seen.

Sure, but the internet serves the economic purposes of most of the world. Nobody wants it to go away. Can't say the same about bitcoin however.

And that sentiment towards Bitcoin is changing every single day.

He is alluding to the anonymous nature of bitcoin. Today even if the funding happens in USD there is trail - to countries and banks. Sanctions can be slapped against countries and banks fined. What about bitcoin? It cannot be fined and the only way to sanction is to "take action"

Bitcoin leaves a permanent trail in a way cash does not. For the IC, Bitcoin is a bonanza.

Sure but mixer services with ability to create unlimited accounts unlike the KYC fulfilled real accounts make things easier on BTC.

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