Internal FBI risk assessment of Bitcoin network [pdf]

Given that Bitcoin records all transactions for posterity, and given the ongoing rise of "big data" analytics, I'd say Bitcoin is likely to be <i>harder</i>, in the long run, to use for shenanigans. A government currency has forms in which transactions create no paper trail. Bitcoin does not.<p>Really the big disruption Bitcoin could cause if it becomes well established, is to act as a stable reference frame against which the other currencies can be compared (versus now, where they all float against each other). No government owns the Bitcoin printing press. It cannot be used as an instrument of fiscal policy, and it weakens the ability to use government currency as an instrument of fiscal policy.

Unless I misunderstand Bitcoin more than I think I do, this is flat-out wrong (~1/3 of the way through the document):<p><pre><code> (U) What Users Can Do To Increase Anonymity ... • (U) Combine the balance of old Bitcoin addresses into a new address to make new payments. </code></pre> Combining balances just means you have a bunch of disparate nodes in the network which may not be related, and you are <i>intentionally</i> connecting them. So if you combined anonymous nodes A-Y with Z which was linked to you, A-Y are now logically linked to you because Z tainted the whole pool. (edit: or at the very least, all the money in A-Y)<p>Yeah, there are ways to make it true/er, but I'm arguing against the principle of the suggestion. And I have doubts that combining (only your) addresses will <i>ever</i> increase anonymity.

&#62; Since Bitcoin does not have a centralized authority, law enforcement faces difficulties detecting suspicious activity, identifying users, and obtaining transaction records<p>Yeah. Difficulty obtaining bitcoin transaction records. Good on you, FBI.

Nice document. It shows well the way of thinking of our governments.<p>"detecting suspicious activity, identifying users, and obtaining transaction records is problematic for law enforcement." - That must deeply hurts FBI people :)<p>"Despite the virtual nature of Bitcoin, users value the currency for many of the same reasons people trust Federal Reserve notes: they believe they can exchange the currency for goods, services, or a national currency at a later date."<p>People do not trust "Federal Reserve notes" (or any other official currency) - they are forced to use it, since they must pay taxes in it.<p>But it is good, that at least some people realize that there is no such a thing like US dollar, only those "notes" printed by Ben Bernanke and his pals.<p>If one day Bitcoin gets truly popular governments will be in trouble. How to tax that beast? I wonder if there is any other solution then poll tax.

This was leaked quite some time ago and determined to be genuine. Wired's original article: <a href="http://www.wired.com/threatlevel/2012/05/fbi-fears-bitcoin/" rel="nofollow">http://www.wired.com/threatlevel/2012/05/fbi-fears-bitcoin/</a>

&#62; FBI assesses with high confidence that [...] malicious actors can [...] use botnets to generate bitcoins.<p>As far as I understand bitcoin (which isn't too far, admittedly), the generation of bitcoins is actually encouraged, and only possible within some well-defined boundaries which basically just ensures that bitcoins are put into circulation up until it hits the fixed limit. Maybe someone could clear that up for me? In that case the "malicious actors" would actually be performing a useful service for the bitcoin ecosystem.

I like the presentation style.<p>The particular phrasing of "assesses with low confidence" took a bit of twisting to understand, though. Its just a convention you have to get use to in these kind of reports, I guess.

Interesting that they don't address whether there are concerns about it eroding tax revenue or if it is a threat to federal reserve notes.

Impressively crafted document. Found it to be very concise and educational.

I would love to participate in this discussion, but I feel like I don't know enough about the economics of currency to make any real contribution.<p>Does anyone know of some good resources (online courses, books, etc)?

Another part of the global anti-cybermoney-publicity-campagne that we can see right now starting is a study of the European Central Bank on "Virtual Currency Schemes", Oct. 2012.<p>Read it: <a href="http://www.ecb.int/pub/pdf/other/virtualcurrencyschemes201210en.pdf" rel="nofollow">http://www.ecb.int/pub/pdf/other/virtualcurrencyschemes20121...</a><p>Edit: BTW, if you are interested in international monetary policy you can find many important publications on the ECB site:<p><a href="http://www.ecb.int/pub/html/index.en.html" rel="nofollow">http://www.ecb.int/pub/html/index.en.html</a>

pdf: <a href="http://www.wired.com/images_blogs/threatlevel/2012/05/Bitcoin-FBI.pdf" rel="nofollow">http://www.wired.com/images_blogs/threatlevel/2012/05/Bitcoi...</a>

What does the "(U/FOUO)" that keeps showing up mean?

"In July 2011 FinCEN revised the definition of money transmission service to mean the acceptance of currency, funds, or other value that substitutes for currency from one person and the transmission of currency, funds or other value to another location or person by any means."<p>Sounds like if you make a market for gift cards you need to be a licensed money transmitter FYI.

"All Bitcoin transactions are published online and Internet Protocol (IP) addresses are linked to the public Bitcoin transactions."<p>How are IP addresses linked to the block chain?

"For instance, child pornography and Internet gambling" - So, me playing the UK National Lottery online is illegal? o.o

s/Bitcoin/cash/ and all the negative arguments about propensity for criminal activity are quite amusing.