From drug dealing to financial crime, Bitcoin finds its way into the grey area of ​​local commerce

Rage Comment : Bitcoin has always been considered to be related to drug trafficking and terrorist financial activities, and the supervision of Bitcoin transactions by different intermediaries and exchanges on the Internet will be more stringent. The invention of Bitcoin ATMs can make Bitcoin the fastest and most convenient payment method. Some people also want to use Bitcoin to save backend expenses. Bitcoin wallets can also protect consumers' privacy. In order to reduce Bitcoin criminal activities, financial institutions have chosen to build blockchain protocols without Bitcoin, which can effectively innovate the cumbersome traditional payment process.

Translation: Nicole

We all know that in order to allay the concerns of global regulators and seek favorable cooperation in the IT and banking fields, the "Bitcoin industry" has been working hard to change its name to the "blockchain" or "digital asset" industry over the past year.

While many in the bitcoin industry would like to distance themselves from activities related to drug dealing and terrorist financing, the technology remains popular with these activities.

While looking for material for an upcoming book, a study on money and finance conducted in 48 states last year found that only a minority of people used Bitcoin.

In almost every case, Bitcoin was used in drug transactions, both legal and illegal.

In South Carolina, a camper behind a hotel was attracted by the Bitcoin sticker on my car. Dave was a married man in his 30s who was apparently unfamiliar with Bitcoin in the Wall Street Journal. Dave sold kratom online for Bitcoin, a tropical plant from Southeast Asia known for its opium-like sedative properties for pain and stress relief.

Like sage in the United States a decade ago, this psychoactive plant has been banned in several countries, and several states in the United States are proposing legislation to ban it.

(Kratom is currently legal in 45 states, with the exception of Indiana, Wisconsin, Tennessee, Alabama and Vermont. Several other states are preparing to legislate after several government agencies issued warnings.)

Kratom is a gray area in South Carolina, where it remains legal, but the example shows that Bitcoin’s most impactful use case right now is bridging the gap between legal activities and illegal ones that are causing headaches for regulators.

In Colorado, Bitcoin appears to be used only as a means of payment for marijuana. According to a Colorado Springs medical clinic salesperson, in cities where medical marijuana transactions are allowed, customers can only use Bitcoin to purchase marijuana once a week. Another salesperson said it was unclear what processor the medical clinic used to accept Bitcoin payments, but she said there would be a $10,000 transaction limit per month.

Notably, she said consumers typically use up those amounts of marijuana within a week.

Bitcoin ATMs

As cryptocurrencies become more popular, online Bitcoin brokers and exchanges will be subject to stricter supervision because of regulatory compliance issues. Previously, only some personal information was required to purchase Bitcoin, and KYC checks have become an industry standard for these companies. However, Bitcoin is still an open platform, and the protocol does not distinguish between users. On the Bitcoin blockchain, an address is an address, regardless of who uses the Bitcoin or how they intend to use it.

Bitcoin ATMs, which operate just like traditional ATMs, are designed, as originally touted, to keep Bitcoin as the fastest and most convenient payment method.

In a bar and restaurant in the United States, the owner told us a story about a customer who knocked on the door for several hours wanting to use a Bitcoin ATM, but the waiter told him that the ATM would also be closed when the restaurant closed. However, the customer said that if he could use the machine, he would give them $100 as a reward.

According to Financial Crimes Enforcement Network's Suspicious Activity Reports (SARs), this is probable cause for money laundering or terrorist attacks using Bitcoin. Criminal activity like this is a red flag that must be reported.

There are far more stories like this than we know.

Last year in Atlanta, two criminals stole a Bitcoin ATM from a cigarette store at gunpoint. While it is unclear how much of the robbers knew about Bitcoin, it is speculated that they thought they could withdraw Bitcoin from the machine or that there was a large amount of cash inside, which was not the case.

Regardless of what they want to gain from Bitcoin, it can be said that most of them want to use Bitcoin to investigate how to save money on back-end business expenses.

Improving the system

When Bitcoin ATMs first appeared on the market, they were seen by consumers as a way to obtain Bitcoin, but in the past few years, Bitcoin ATMs have become less popular due to complex user experience and regulatory pressure.

Like most of the Bitcoin economic infrastructure, Bitcoin ATMs are still in the process of development as industry operators work to iron out kinks and make Bitcoin more accessible to buyers.

Aaron Williams, founder of Coinnections, is an entrepreneur who is seeking solutions to relax the KYC requirements required of ATM owners. Currently developing a beta test version of an anti-money laundering software product for cryptocurrency businesses, the Coinnections founder believes that American consumers will prefer Bitcoin ATMs to Bitcoin exchanges in the future.

Aaron Williams

Williams said:

“Bitcoin ATM operators can take advantage of their small size and implement a true risk-based AML program that lowers the threshold for verification while allowing users to purchase enough Bitcoin. ATM operators can also profit from not having to comply with regulatory requirements in various regions.”

While that appears to have slowed adoption of the machines, several anonymous bitcoin ATM operators say they are still able to attract large amounts of cash from underserved minority groups.

Gil Luria, a bitcoin and blockchain analyst at Wedbush Securities, believes bitcoin ATMs can play an important role in other less controversial gray areas of the financial system, such as helping underserved groups or mobile workers.

He said:

“The primary use case for Bitcoin ATMs can be to maintain consumer anonymity, as linking a Bitcoin wallet to a bank account or credit card defeats the purpose. Bitcoin wallets funded with cash preserve consumer privacy.”

The way the Bitcoin ecosystem develops continues to be a matter of discussion in the industry, although so far, it is not due to venture capital or large bank investment. The connection between Bitcoin and criminal activity has ushered in the "blockchain without Bitcoin" initiative, which allows regulated, risk-averse financial institutions and enterprises to choose to build their own blockchain protocols without the Bitcoin currency.

But whether or not Bitcoin is used in gray areas of trade, it is the only blockchain project currently that can lead to innovation in the cumbersome traditional payment process.