Bitcoin has no value and only used by criminals!
Bitcoin is used by criminals and has no value. Probably the most quoted putdown’s we hear about Bitcoin!
But what is the real truth? Often muttered by the naysayers who really just don’t understand Bitcoin and cryptocurrencies. Rather than try to understand it’s much easier to bash it with one of the most common phrases attached to the coin. Just recently Bill Harris, ousted CEO of PayPal (after 1 month) has been quoted as saying:
“For the vast majority of uses, bitcoin has no role. Dollars, pounds, euros, yen, and renminbi are better means of payment, stores of value and things in themselves. Cryptocurrency is best-suited for one use: criminal activity.”
In contrast to this stance, Peter Thiel, who became CEO of PayPal after Harris’s ousting is famous for being positive on Bitcoin. He compares it to gold and feels it has the potential to revolutionise the existing financial system.
The existing Financial Establishment is happy to fuel speculation and rumoring about Bitcoins main users being pornographers, drug dealers, and terrorists. Even recent Senate hearings in the US were concerned with bitcoin facilitating a new generation of money laundering techniques. US Treasury Secretary Steve Mnuchin said,
“We want to make sure that bad people cannot use these currencies to do bad things.”
So are bad people doing bad things with cryptocurrency? Claims are easy to make, often though they are completely unsubstantiated, without any, or little data to back them up.
One recent independent study was carried out by The Foundation for Defense of Democracies. A blockchain analytics company called Elliptic along with the FDD Centre of Sanctions and Illicit Finance conducted the survey. The full report is entitled BITCOIN LAUNDERING: AN ANALYSIS OF ILLICIT FLOWS INTO DIGITAL CURRENCY SERVICES but an appraised version can be found on Bitcoin Magazines site.
They found that less than 0.61% of Bitcoin transactions were being converted due to related illegal activity over the period they studied (2013-2016).
They openly admit they couldn’t have totally covered every exchange or method of transacting bitcoin and suspect the real figure is higher. Let’s assume they were wrong by a factor of 10 and that 6% was a more likely figure. In 2017 that 6% would equate to approximately $18.9 billion (source blockchain.info) of USD transactions on the blockchain.
To put that into context, a statement on transnational organised crime by the UNODC said:
‘In 2009 it was estimated to generate $870 billion – an amount equal to 1.5 percent of global GDP.’
According to world bank data, the latest global GDP figure (2016) is $75.5 trillion with 2017 to be approximately $80 trillion.
So, using the 1.5% figure from UNODC that means $1.2 trillion is illegally transacted globally and so the illegal activity transacted by BTC represents just 1.5%, hardly a criminal epidemic use of BTC!
So who is handling these transactions?
We now know that only 1.5% of the worlds criminal USD transactions are placed through bitcoin. That means 98.5% is being transacted elsewhere. So where is this criminal nirvana for illegal transactions? It’s called the Global Banking System and its been around for some time!
The table below shows the fines imposed by the US on Global banks for AML breaches. This doesn’t excuse the US banks, they are also being fined for similar breaches, JP Morgan being just one.
The regulators surely know this is the case, so why are cryptocurrencies the enemy and the ‘bad guy’? Maybe it’s because of the threat to the established fiat money system and the institutions guarding their own interests. Time will tell on that one.
Does Bitcoin have value?
Another often heard putdown for BTC is ‘it has no value’. But what value does a $1 piece of paper have? It is pure trust that is placed in the Government issuing that note, be it a $, £, € or ¥. Gold is no different and yet we all believe in the value of gold. It has only become this way over many years of humans slowly ‘attaching’ a value to it. Bitcoin is very similar to gold in many ways. Like gold, there is a finite supply of bitcoin. Like gold BTC has to be ‘mined’.
So why does gold have this intrinsic value? It is a rare commodity but not so rare it is impossible to own. It has certain properties such as not corroding, long lasting, and being soft enough to shape and so used for jewelry. In the modern world it has a commercial value too such as heat reflection properties and a good conductor of electricity. This has meant that over time society, and now economies have placed a value on gold, thus perpetuating its worth. It does not provide food, shelter or clothing, but with gold, these items and more can be purchased.
In history when currencies fail and stop working, societies have historically fallen back to a ‘gold standard’, which means gold also has some value as insurance against difficult times. But the disadvantages of gold are that it is heavy – making it difficult to transport or carry. It is also difficult to divide into small usable amounts to purchase items with, especially smaller value items.
Bitcoin has similar properties to gold. Satoshi ‘programed’ the properties of gold that make it valuable into the bitcoin blockchain, making bitcoin a more efficient and easier-to-use form of gold. It is very like digital gold existing on the Internet. Bitcoin takes up no room in your wallet, safe, or vault, and currently it can be spent in any amount out to eight decimal points – or 1 Satoshi. So, no matter what the price of 1 BTC it can still be spent in whatever small amounts the user wants. This now allows the spending of BTC online in small amounts with very little cost involved. With the average online transfer costing 10% in G8 countries, plus the fees a retailer pays to credit card companies, for example, BTC is the perfect solution for online borderless transfers.
Now when someone says to you BTC has no value and used only by criminals you can hopefully give them a reasoned response!
Please feel free to leave any thoughts below, we’d love to hear them.