With the increased popularity of Bitcoin, its strengths have given it a unique status in the alternate currency community while its weaknesses have come under intense scrutiny. Keeping Bitcoin safe should be the number one priority of everybody who uses it, since its value is directly tied into how secure the system is. There are a few major steps to take in order to help keep Bitcoin going, primarily focused on the payment processors and exchanges where Bitcoin is traded.
Preventing credit cards and bank accounts from being used by identity thieves to purchase Bitcoins is extremely important to its long-term sustainability. As it stands, it is unfortunately too easy right now for thieves to use a stolen credit card to purchase Bitcoins
then immediately turn around and resell them for basically the same amount either privately or on a Bitcoin exchange. Since this can all be completed in as little as 30 minutes, there is not enough time for a credit card fraud victim to alert their bank or their credit card company to cancel the card or to start an investigation before the thieves have already made off with their money.
In order to prevent fraud from happening on a large scale, there needs to be another level of identity verification needed for buyers and sellers. Some exchanges currently require a photocopied ID for large withdrawals, but that would not stop someone from making 10 different trading accounts to get around that restriction.
Preventing Money Laundering
The very thing that makes Bitcoin so appealing to people who do not wish for their financial data to be traded among so many entities also appeals to criminals who may be looking for a way to launder ill-gotten money
. Bitcoin transactions are very hard to track to an individual, meaning that it is technically possible for hundreds of thousands of dollars, if not millions, to be turned into Bitcoins then sold and the money withdrawn to a bank account which makes it look like it was earned legitimately.
What can possibly happen in this case to stop money laundering is to, once again, require verification for large transfers, or several transfers of a similar fairly large amounts. In this case, if law enforcement did want a paper trail dealing with where the money came from, there would be one available. This would prevent law enforcement from wanting to shut down Bitcoin exchanges because of the lack of documentation from a pseudo-banking entity.
Feds Are Cracking Down
We are moving in the right direction though. The Feds have started investigating and charging criminals who are using Bitcoins illegally. If the government is consistent in enforcing proper use of this virtual currency, it will preserve its sustainability for others who are using it legally.