Bitcoin, Ethereum, and Other Cryptocurrencies and their Illegal Uses

A Washington Lawyer’s Opinion on Cryptocurrencies and the Legal Issues Surrounding Illegal Use.

Patrick Kwan is a Seattle area business law attorney who handles Bitcoin and cryptocurrency matters.  The issue of illegal vs. legal uses of cryptocurrencies will be an issue of growing importance and is worth talking about.

Cryptocurrencies like Bitcoin, Ethereum, Bitcoin Cash, Litecoin, and others are popping up everywhere and increasing with popularity. While the IRS and the US federal government have at present decided to treat cryptocurrencies such as Bitcoin and Ethereum, as property, it can be argued that cryptocurrencies are a unique hybrid of property and currency. The current IRS decision ruled to treat Bitcoin, Ethereum, and other cryptocurrencies like property rather than currency will, as with many things, change as civil and business lawyers litigate and legislators tinker with the laws. Like startups in the late 90’s, these cryptocurrencies are exciting people with their volatile nature, the potential for quick profits, but one needs to be aware of staying away from anything that can be argued to be illegal activity.  With great risk comes great reward but too much risk can end you in a jail cell.

While Bitcoin creator, Satoshi Nakamoto initially created Bitcoin to act as a peer to peer cash system, it has evolved into other uses. India’s cancellation of it’s largest bill denomination sent Bitcoin and other cryptocurrencies on the upward trend as buyers rushed to buy Bitcoin and cryptocurrencies as a safety measure for fear of the Indian monetary system would crash. The Bitcoin and cryptocurrency plot thickens as the peer to peer cash system has evolved into a hot commodity that is sought after and accepted in lieu of cash or traditional government-issued currencies.

1. Drug Transactions

Bitcoin and cryptocurrencies have allowed drug transactions to become lighter in the regard that traditional physical currencies or handle cash do not have to change hands. While this may not change the average street transaction between a pusher and a junkie, it does on the more casual transaction. In a drug trade where many dealers make house calls, Bitcoin and cryptocurrencies help facilitate a smoother transaction. Now dealers do not have to carry cash or risk being robbed and do not need to limit transactions to local connections.   One need only glance at the news to see how major the US government considers this a problem for cryptocurrencies.  The Bitcoin or cryptocurrency is transferred in a relatively short time and risk is significantly decreased.

2. Prostitution

In the same vein as the drug transactions, sex workers no longer have to receive funds from the John and the John does not have to take that substantial step bringing money to a sex worker or creating a financial trail back to them. Visa and Mastercard recently pulled out of www.backpage.com. While this does not sound like a big deal, it is when Visa and Mastercard no longer accept payments to and from a major advertising tool for sex workers. While this does not totally stop nor prevent sex workers, it does throw a wrench into the process and cryptocurrencies are being used to fill the void.

3. Ransomware

While it is an illegal activity, the world of ransomware and taking over another’s computer and holding it hostage occurs, goes on, and is on the rise according to the FBI. In most instances, a computer user visits a website and usually attempts to make an illegal download. Sometimes porn, sometimes shared music or movies. Inside the download is a program that allows another computer user from a remote site to control your computer and hold it hostage. The ransom is usually cash through a transfer, but now ransomware bandits have gotten savvy and many are now asking for Bitcoin or cryptocurrency as ransom in place of cash.

4. Online gambling

Similar to the prior three instances, online gambling is now made easier and done without actual cash. It can be done with Bitcoin or cryptocurrency. While you may be skirting the letter of the law by not gambling with actual cash or currency, it may only be a matter of time before Bitcoin and cryptocurrencies are recognized as currency or cash. Sites such as casino.org/payment/bitcoin/ and mybookie.ag/  are two of the more popular online betting and gambling casinos that accept Bitcoin and other cryptocurrencies. The presumption is that more and more sites and services will begin accepting Bitcoin and cryptocurrencies.

5. Money laundering

Money laundering is the single biggest use or Bitcoin and cryptocurrency. The Chinese government issued a ruling that it will ban the trading of Bitcoin and cryptocurrency. This was an effort to keep more money in China and prevent money being transferred out of China. However, this is not the first time China has stated its position and it may only lead to Chinese finding other means to accomplish their goal. The official announcement by the Chinese government on Sept 14, 2017, led to a bearish turn in the cryptocurrency market. However, nearly two weeks later, the prices were back on the bullish trend and at almost pre-announcement levels. One thought here is that this could have been an attempt for buyers and speculators, including the Chinese to purchase more Bitcoin and cryptocurrencies at a heavily discounted rate and to have a nice ride back up profit mountain.

While these are not the only illegal, illicit, or dark uses of Bitcoin and other cryptocurrencies, they are the most popular and most common. For more information on Patrick Kwan and his business law practice including Bitcoin and cryptocurrency legal issues, please visit rhodeslegalgroup.com/seattle-criminal-law-attorneys/patrick-kwan/.

Patrick Kwan is a Seattle area based business lawyer handling Bitcoin and cryptocurrency matters. Mr. Kwan runs a Bitcoin and cryptocurrency practice group from Rhodes Legal Group, a Seattle area business law firm. You can reach Mr. Kwan at patrick@rhodeslegalgroup.com

With near over 25 years of business world experience as an entrepreneur, distributor and manufacturer, Patrick Kwan is the kind of experienced business leader and lawyer who understands business from conception to sustained, profitable, on-going operation. Mr. Kwan brings his proven track record of success in innovation, leadership, business growth, management, sales, and operations to the counsel and practice of law. As an attorney, he is highly motivated, resourceful, hard-working, goal-orientated, a great team player, well-organized, and able to transcend adversity. Read more >>