So the Silk Road was busted last night, when FBI agents arrested its alleged owner Ross William Ulbricht and seized its assets. Those assets included a lot of Bitcoins, the crypto-currency which was the main token of exchange on the site – and led to a crash in the dollar value of Bitcoins. South Africa’s own Bitcoin exchange – the trading house where Bitcoins can be turned into rand and vice versa – isn’t concerned, however. Owner Timothy Stranex spoke to us this morning to say that he believes Bitcoin will emerge better than ever from the event.
BitX, which launched earlier this year, buys and sells Bitcoins and facilitates trades between third parties. Coins are usually sold in fractions from a few percent upwards, and anywhere between one and 30-ish full coins pass through BitX daily. Following news of the Silk Road bust, the value of a coin fell from R1 360 to R1 050, although it has already recovered to R1 200 this morning.
“If you look at the markets prices,” says Stranex, “The price dropped for a short time but it has already largely recovered and seems to be on an upward trend. The drop was likely due to speculators reacting to the news (trying to sell when the price is high and then buy again when it’s lower). Bitcoin is well-known to be volatile and most traders are ready for events like this. I don’t think the Silk Road closure is enough to hurt Bitcoin in the long term.”
Stranex says that the association with Silk Road was bad for the reputation of Bitcoin, and created negative connotations in the minds of potential users.
“The closure will help to dispel the often-reported myth that ‘Bitcoin is only used for illegal activities'”, he says, “And that ‘it’s impossible to police the use of Bitcoin’. It will probably have a good effect on our business since it’s another event that demonstrates that Bitcoin is becoming more legitimate. We didn’t lose any money and we will continue operations as normal.”
Stranex is also hopeful that the funds captured by the FBI will eventually be returned to circulation, but even they aren’t it’s not a calamitous loss to the community.
“The total circulation of Bitcoin is currently about 1.3 billion USD. If 3.6 million USD are taken out of circulation, it is a nontrivial amount, but still only 0.2% overall,” he says, “I don’t think these funds are gone for good though. The FBI are surely aware of the value of the coins and will likely sell them to generate income once the legal proceedings are complete – as they would do if they had seized cash.”
Several South African businesses already accept Bitcoins – which can be generated on a home PC, although the electricity cost is likely to be more than the coin’s value – as a form of payment, and there’s a more-or-less comprehensive list here. They include: