Bloomberg: Bitcoin's CP Dark Side Emerging

LOS ANGELES — Supporters of the use of bitcoin for adult online purchases have lauded the cryptocurrency for its anonymity, but a dark side of the new payment method is emerging that's facilitating the spread of child pornography.

A Bloomberg report cited the work of the U.K.’s Internet Watch Foundation that found cryptocurrency being accepted for nearly 200 child pornography sites with purchases ranging from as little as $1 to hundreds of dollars. Researchers in the U.S., Germany and several other countries are seeing the same.

“The emergence of bitcoins as payment for child sexual abuse represents the newest challenge in the fight against child pornography," Sarah Smith, an IWF researcher told Bloomberg. “This is just the beginning.”

The report said that the new currency is also undermining the efforts of investigators who have clamped down on the use of traditional child pornography credit card payments by hiding the perpetrators’ identities.

John Shehan, executive director of the U.S. National Center for Missing and Exploited Children in Alexandria, Virginia said the currency provides “commercial child sexual abuse website operators with a method to revitalize their payment stream.”

Bloomberg reported that federal agents said bitcoin has been used for a number of illegal transactions including child porn that included the Mt. Gox exchange in Japan, shut down in April after a major currency heist.

Patrick Murck, the general counsel for the Bitcoin Foundation said the organization is doing what it can to stop the currency’s use for illicit activity and that virtual currencies will strive to scrub their image to ensure growth and avoid increased regulatory oversight.

Murck acknowledged however, that it’s “naïve” to think bitcoin isn’t being used for child pornography.

“The people that do this stuff should burn in hell,” Murck said. “The more we can do in a proactive way to prevent digital currencies from being abused, the better.”

A move against online anonymity is being forged by The Digital Economy Task Force, which fights child exploitation online. The group has asked countries to regulate virtual currency exchanges and to apply anti-money laundering rules to them.

Ernie Allen, co-chairman of the task force and director of the International Center for Missing and Exploited Children in Alexandria, Virginia said existing regulations in many countries could be applied to virtual money where currency exchanges would have to be registered, hold a license, and maintain some information on users.

Allen said that otherwise, the only way to catch the bad guys is for police to go undercover on forums and bulletin boards.

“If we depend on offenders to make mistakes, then we are catching only the dumb ones,” Allen said.

He maintained that the pedophiles face little chance of detection by using unregulated, unbanked currencies that move outside the financial system.