*Originally published on 05/06/2019
A former official at a major US regulatory organisation has described Bitcoin as a way to “facilitate criminal activity” through Bitcoin fraud.
John Stark, who previously worked at the US Securities and Exchange Commission as the head of the Office of Internet Enforcement, made his controversial remarks in an article written for the website Law360.
Stark, who said that initial coin offerings (ICOs) were “unregulated crypto-casino fundraising mutation[s]”, covered a lot of ground in his piece.
Bitcoin, he said, was “a worthless sham that’s only useful for facilitating crime, and the public must be warned about the full spectrum of the crypto-sphere’s sleaziness”.
On the topic of ICOs and their similar equivalents IEOs (initial exchange offerings), he argued that the rise in popularity of these tools has been used by unscrupulous fraudsters to trick crypto traders.
“IEOs represent yet another blatant attempt to hijack a similar-sounding acronym — IPO — in an effort to lure investors seeking to get rich quick”, he said.
“However, just like ICOs, the IEO has not a single element in common with the IPO (other than the first and last letters of its acronym).”
As well as the nature of Bitcoin itself, Stark also addressed the problem of what cryptocurrencies are used for.
Crypto is decentralised, meaning that it is not administrated by any single network leader. It is also anonymous, and transaction times are speedy – leading Stark to argue that it is used for illicit purposes on a systematic basis.
“Much of bitcoin’s value, outside of mere speculation, is derived solely from its ability to facilitate criminal activity”, he said.
“Need a fake I.D., bottle of opiates, a cache of credit card numbers, or a thousand Social Security numbers? Need a way to collect a ransomware payment? Need to fund terrorist-related activities? Need to hire a hitman?”
“Cryptocurrencies like bitcoin have become the payment of choice for these, and a slew of other, criminal enterprises”, he added.
Stark’s opinion is respected given his history of working with the Securities and Exchange Commission (SEC), which is one of the American government’s most prominent regulators.
The SEC is responsible for a number of tasks related to the crypto world, such as whether or not to approve new providers of crypto products like exchange-traded funds.
Stark is now an independent consultant, and he runs his own company called John Reed Stark LLC. It runs cybersecurity projects on behalf of clients, and also provides incident response investigations in the event of a breach.
Stark ended his article by predicting that there will be a significant slowdown in the global value of Bitcoin, and that it does not have a fundamental value.
“People are going to wake up one day and not find that the value of their BTC investment is diminishing, but that it is zero”, he argued.
“One moment you will be looking at US$8,000 per coin, the next, global trading will be suspended. The true market of BTC is zero. When it’s stopped, it will just end.”
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