Earlier today, Microsoft founder Bill Gates commented on bitcoin, initial coin offerings, and cryptocurrencies more generally during a Reddit AMA. In his comments, Gates stated that the use of cryptocurrencies for anonymous payments is not a good thing due to the difficulties it creates for law enforcement when going after criminals.
Gates has commented on Bitcoin multiple times throughout the existence of the peer-to-peer digital cash system. In the past, he has called bitcoin a “techno tour de force” and discussed the difficulties associated with price volatility.
Let’s dissect Gates’s most recent comments further and see if they withstand a bit of basic scrutiny.
Gates’s Comments from Today
During today’s AMA, Gates was asked for his general thoughts on cryptocurrencies. Here is his full response:
“The main feature of crypto currencies is their anonymity. I don’t think this is a good thing. The [government’s] ability to find money laundering and tax evasion and terrorist funding is a good thing. Right now crypto currencies are used for buying fentanyl and other drugs so it is a rare technology that has caused deaths in a fairly direct way. I think the speculative wave around ICOs and crypto currencies is super risky for those who go long.”
The first point to make here is that censorship resistance, not anonymity, is the key value proposition of bitcoin, which is the most widely used cryptocurrency in the world today. Bitcoin is far from anonymous in its current state, although proposals exist for adding better privacy to the system in the future.
Having said that, more anonymous cryptocurrencies, such as Monero and Zcash, do exist. Recently, Monero has gained more attention and recognition among those who transact via darknet markets.
Gates also points to bitcoin and other cryptocurrencies’ use in the global fentanyl trade, which has contributed to an epidemic of overdoses in the United States and elsewhere. Last year, the Department of Justice mentioned multiple fentanyl-related deaths as they announced the takedown of darknet market AlphaBay.
When another Redditor commented that physical U.S. dollars are also used in the global drug trade, Gates pointed out that anonymous ecash has the potential to make these sort of criminal dealings much more efficient.
“Yes – anonymous cash is used for these kinds of things but you have to be physically present to transfer it which makes things like kidnapping payments more difficult,” commented Gates.
An Alternative Point of View
Gates is correct in that bitcoin has made it easier to profit from certain types of crime. For example, it’s easier to collect a ransom from someone if you don’t have to actually show up in person at a designated location to collect the cash.
Additionally, bitcoin is widely used by hackers who install ransomware on victims’ computers in order to profit from their malicious activity. Having said that, one silver lining in the case of ransomware is that it may actually be leading to improvements in computer security for small businesses and individuals (see this article for more details on that).
So yes, there are some downsides to Bitcoin, much like there are downsides to any other new technology. After all, the criminal activity that takes place via Bitcoin is also made possible via the Internet itself. Recent studies have also found a decline in criminal activity as a percentage of the overall bitcoin economy.
Original post: Forbes