Recent publications by the US federal government indicate that Bitcoin will likely be used in illicit cross-border transactions, and that the Office of National Drug Control Policy (ONDCP) is ramping up efforts to detect and interdict bitcoin transactions. There is a special focus on Canada and the United States.
As part of next year’s budget, the Office of National Drug Control Policy (ONDCP) requested $3,730,815 (PDF) for “High Intensity Drug Trafficking Areas” in the Pacific Northwest. The ONDCP “advises the Administration on national and international drug control policies and strategies, and works to ensure the effective coordination of drug programs within the National Drug Control Program agencies and with various other governmental, non-profit, and private entities.”
The budget report states:
[Drug Trafficking Organizations] in the Northwest HIDTA region utilize novel money laundering techniques and emerging technologies to launder illicit drug proceeds. Bulk cash smuggling, the use of money service businesses, and the double exchange continue to be the primary methods of money laundering in the state. The double exchange usually involves the smuggling of cocaine and marijuana across the U.S.-Canada border while decreasing the need to smuggle the proceeds of the drugs by instead wiring money. While no investigations have been reported, the use of Bitcoins, an anonymous and decentralized digital monetary system, is likely to emerge as a major money laundering tool for traffickers. [emphasis added]
It is odd that that the ONDCP refers to Bitcoin as anonymous when it has been well documented to be pseudonymous. Though, it is interesting that the Drug Enforcement Administration (DEA) was unable to identify the source of the Bitcoins it seized, as first reported by Let’s Talk Bitcoin in “DEA Seizes Bitcoin: Seizure Points to Earlier Mistaken Identity.” It seems unlikely that Bitcoin would become a major money-laundering tool, as each transaction is permanently recorded on the blockchain public ledger and the government has been implementing sophisticated systems to monitor transactions. However, if there ever comes a time in the future when physical money is retired and the government exclusively issues digital money, this could indeed shift black market transactions to Bitcoin or another decentralized currency. NPR’s Planet Money, for example, recently ran the story “Should We Kill the $100 Bill?” in response to Harvard University economics and public policy professor Kenneth Rogoff’s research. Rogoff authored “Costs and benefits to phasing out paper currency” (PDF) and told the Wall Street Journal that he was inspired by Bitcoin to revisit the subject. He notes:
Think about countries like Mexico, Colombia, where they’re really at war with the drug money, where the United States is not only buying the drugs but it’s providing this [$100 Bill] resource that very much helps the drug dealers.
The Marijuana Threat
Perhaps equally perplexing, if not disturbing, is ONDCP’s “Threat Assessment” section of the report, which classifies marijuana as one of Washington State’s “greatest threats”:
Both methamphetamine and marijuana are considered by the Northwest HIDTA to be Washington State’s greatest threats because of their availability and their association with crime.
Washington State legalized the recreational use of marijuana in 2012 under I-502, which states that “recreational use marijuana must be purchased from a state-licensed retailer.” While the measure was passed back in 2012, Washington just opened the dispensaries in July of this year. It was the second state after Colorado to open recreational dispensaries.
State marijuana laws are obviously at odds with federal law. This makes it extremely difficult for “legal” marijuana businesses to obtain bank accounts. Marijuana is classified by the US government as a Schedule I drug and until this changes—even as the International Business Times reports that Congress is helping pot growers become more attractive partners for banks and The Washington Post reports that “Obama administration clears banks to accept funds from legal marijuana dealers“—it continues to be difficult for marijuana businesses to obtain basic financial services.
To make matters even more cumbersome, in the United States, each state has its own money transmission laws. For example, PayPal has a license with every state. Washington State is among thirteen states that share a border with Canada (which has the longest international border in the world). While Canada has eight provinces or territories that share a border with the United States, licensing occurs at the federal level with FINTRAC or the Financial Transactions and Reports Analysis Centre of Canada. In June, the Parliament of Canada approved the first national law on digital currencies and regulates digital currencies as MSBs (money service businesses). (See ”
Source: Bitcoin Prime nieuws