I'm taking a Bitcoin risk even though I don't hold Bitcoin. Please regulate me.
13 November 2017
In the country where I live, kidnapping for ransom is not a very common crime.
That's because picking up the ransom is too risky.
It's easy to kidnap someone, and easy to let the person go when the ransom is paid, but picking up the ransom exposes you. Wannabe kidnappers who are motivated by money tend to choose other crimes.
As the [family relationship redacted] of a [family member information redacted], I'm happy that kidnapping is difficult here. High transaction costs for some kinds of transaction are a good thing.
Now, here comes Bitcoin.
As we're already seeing with ransomware, harder-to-trace ransom drops are now a thing.
So, even though I don't actually hold Bitcoin, someone could grab my family member (low risk), demand that I exchange some of my conventional assets for Bitcoin (low risk) and send the Bitcoin as ransom (low risk). The balance between risk and reward for the crime of kidnapping for ransom has changed.
IMHO this is a bigger problem than any of the reasons that Charles Stross wants Bitcoin to die in a fire.
So what to do about it?
Move the risks where the profits are.
Make the Bitcoin business eat the costs of payments made under duress.
New rule: If I ever trade any assets for Bitcoin in order to comply with a threat, and then transfer the Bitcoin under duress (kidnapping, ransomware, whatever), then I can go back to whoever I gave the assets to with a copy of the police report on the incident and get my original assets (and any fees) back.
Yes, that makes it harder for regular people to trade assets for Bitcoin. Exchanges would have to hold the money for a while, check that I'm not under duress, and probably do all kinds of other pain-in-the-ass, possibly costly, work. But I'd rather have that than the alternative.