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Silk Road: Completely Under the Radar?

A couple of Democratic Senators have made the news recently by exposing an anonymous online drug marketplace, where users can buy illegal drugs away from the prying eyes of law enforcement agencies. This article talks about Silk Road, bitcoins and how black market goods are bought and sold online like books.

Senators publicize Silk Road

On Sunday, June 5, 2011, Senators Charles Schumer of New York and Joe Manchin of West Virginia sent a letter to Attorney General Eric Holder and Drug Enforcement Administration (DEA) Administrator Michele Leonhart, demanding the suspension of Silk Road, a website that allows people to buy and sell drugs online anonymously.

According to New York Senator Chuck Schumer:

“[Silk Road] allows buyers and users to sell illegal drugs online, including heroin, cocaine, and meth, and users do sell by hiding their identities though a program that makes them virtually untraceable. It’s a certifiable one-stop shop for illegal drugs that represents the most brazen attempt to peddle drugs online that we have ever seen. It’s more brazen than anything else by lightyears.”

Silk Road makes use of a digital, peer-to-peer currency called bitcoins, which allow payments to be untraceable. Regarding bitcoins, Schumer argued, “It’s an online form of money laundering used to disguise the source of money, and to disguise who’s both selling and buying the drug.”

In response to the Senators’ demands to shut down Silk Road, the DEA spokesperson Dawn Dearden said:

“[The DEA] is constantly evaluating and analyzing new technologies and schemes perpetrated by drug trafficking networks. While we won’t confirm or deny the existence of specific investigations, DEA is well aware of these emerging threats and we will act accordingly.”

Bitcoin users argue…

Although many people were only made aware of bitcoins through the media spotlight on Silk Road, the digital peer-to-peer currency was not designed to facilitate online drug abuse or money laundering. The currency is acquired through exchange sites, which allow users to transfer actual currency, such as euros or US dollars, into the digital currency. While hackers use bitcoins for donations, there are also a number of legitimate uses for bitcoins, such as funding organizations including the Electronic Frontier Foundation (EFF).

Unfortunately, because the senators presented the threat of Silk Road and bitcoin as one in the same, many seem to believe that bitcoins facilitate black market transactions. The reality is that bitcoin operates independently from Silk Road.

Proponents of the currency argue that shutting down bitcoin because it can be used to purchase drugs is much like banning cash, since it could be used for illicit purchases. Bitcoin users are concerned that the US government might shut down exchanges, such as Mt. Gox, which are used to purchase bitcoins.

Silk Road Unaffected

Targeting the bitcoin currency would be an entirely pointless activity, in terms of targeting Silk Road transactions. Because the site is hosted by the Tor network, it can easily shift servers and possibly change payment methods. Thanks to Tor’s anonymizing service, personal information is kept hidden from the authorities.

The process of exchanging hard currency into bitcoins is not completely anonymous. There are exchanges with actual bank accounts, such as the Mt. Gox Bitcoin Exchange, which some fear may be targeted by the US Justice Department and other law enforcement agencies. Some bitcoin users maintain that if transactions involving bitcoin exchanges are banned, a layer of shell companies might continue to facilitate the change.

Furthermore, US law enforcement agencies may have trouble stopping the exchange of the digital currency without collaboration from their peers worldwide. It’s long been speculated that the bank account for Mt. Gox is located in Japan, and other evidence points to other exchanges operating outside of the US.

Summary

This article takes a look at the website Silk Road, which has recently come into the focus of two US Senators Charles Schumer and Joe Manchin, in June 2011. The Senators called for the Drug Enforcement Administration to shut down the website, which facilitates the buying and selling of illegal drugs – such as heroin, cocaine and meth – completely anonymously. Silk Road is able to hide the identities of its users through the Tor anonymity network, along with the use of bitcoins, which are an untraceable peer-to-peer currency.

CIPP Exam Preparation

In preparation for the Certified Information Privacy Professional/Information Technology (CIPP/IT) exam, a privacy professional should be comfortable with topics related to this post, including:

-          De-centralized architectures (III.B.b.)

-          Privacy-enhancing technologies (III.B.c.)

-          Anonymity tools – applications and payment processing (III.B.d.iii.2.)

 

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