US Special Ops worried about terrorist use of Bitcoin

Here is more evidence that Bitcoin is going to have an uphill battle gaining acceptance with the financial establishment (and in this case the US intelligence agencies monitoring terrorists). We have noted on this blog that the lack of ability to track the flow of funds (while popular with those who do not trust the system) causes Bitcoin to be viewed as a potential problem within the system. Below are some quotes from this CNBC article about this. Also, I think this is the same group Jim Rickards met with recently in Florida.

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"The United States military is studying digital currencies like bitcoin to learn if they can be traced and to figure out how they are used by America's adversaries around the world."

"CNBC has learned that the global policy counsel of the Bitcoin Foundation flew to Florida to meet with officials from U.S. Special Operations Command for a daylong discussion Monday on the role of so-called cryptocurrencies—of which bitcoin is the best known—in illicit finance."

"The military's interest in virtual currency is part of an overall effort by special operations forces to understand how their enemies finance themselves, and what intelligence special operators can glean by following the illicit money."

"Among the roughly 100 attendees at the event, said several participants, were business executives and specialists in financial payment processing, experts in bitcoin operations, Silicon Valley executives, representatives from the U.S. Treasury and Department of Homeland Security, as well as members of the U.S. intelligence community."

"A key question for the officers in the room: Can the U.S. military trace bitcoin? "That's a difficult question," said the defense official, "and one we're working through now."

"One attendee characterized cryptocurrencies as "very dangerous stuff" for the U.S. military. "We were brought in [to Monday's meeting] to work on ways to meet the challenge," he said. "I don't want to say what they were."

"Pinguino Kolb, co-founder of the website Spelunk.in which tracks cryptocurrencies, said the digital currency community is largely skeptical of the U.S. government and of U.S. intelligence. News of a meeting between bitcoin advocates and the Special Operations Command may not be taken well in that community, she said. "A lot of people think, 'oh, my God, government—scary," she said. "They wouldn't look at both sides of the story as much as they would kind of just freak out on Reddit."

"Still, Kolb said the broader cryptocurrency community understands the tensions between security and freedom. "Nobody wants the bad guys to get a bunch of money," she said. "But they don't want to lose their freedoms, either." She added that U.S. intelligence would do well to focus less on bitcoin and more on other alternative currencies that are more focused on anonymity, like Darkcoin, which Wired magazine called "the shadowy cousin of bitcoin."