Two major figures of the Bitcoin community have been arrested. Charlie Shrem, chief executive of New-York based BitInstant, and Robert Faiella, a virtual currency trader also known as “BTCKing”, have both been accused of having taken part in a scheme that sold over $1 million in Bitcoin to users of “Silk Road”, the underground digital black market that enables its users to buy and sell illegal drugs anonymously.
The media particularly commented on the arrest of Charlie Shrem who was one of most famous Bitcoin personalities. Shrem discovered Bitcoin in 2011, when still in school, and almost immediately started his own company – BitInstant, one of the Bitcoin largest exchanges on the internet – facilitating the use of Bitcoin through a fast and easy exchange for traditional currencies. Last year, Business Insider wrote an article on the “Bitcoin Millionaire” or in other words, young entrepreneurs who prematurely built up a fortune on the digital currency because they saw the potential business value behind it; Shrem was one of them. More than being a Bitcoin star, Shrem was also a founding member and Vice Chairman of the Bitcoin Foundation, a trade group whose mission is to help people exchange resources and ideas more freely by standardizing, protecting and promoting Bitcoin. He has resigned since. He was also often invited to conferences as a Bitcoin speaker. Charlie Shrem has been accused of allowing Mr Faiella of using BitInstant to purchase large quantities of Bitcoins to sell on to Silk Road users.
What do those arrests mean for Bitcoin really? The exchange rate has not moved. However, rest assured from now on Bitcoin will be under strict surveillance and control. The story of BitInstant illustrates perfectly the future relationship between Bitcoiners (users and new businesses) and the established authorities. Charlie Shrem who appears in the documentary “The Rise and The Rise of Bitcoin” (released on March 25th 2014) himself foresaw legal troubles (see trailer): “I spend thousands of dollars on lawyers every day to make sure that I am not gonna go to jail.”
The digital currency continues to make daily appearances on the media. On Thursday 6th February, the major Japan-based Bitcoin exchange MT. Gox suspended trades to resolve ongoing technical issues. This event, however, created massive movement on the exchange rates. Bitcoin lost nearly 20% of its value (from $850 to $680.52 few hours later). Investing on Bitcoin has become highly speculative. Kevin Green, a 24 year-old software engineer at Google, was interviewed by Re/code and noticed that the way Bitcoin is perceived has dramatically changed: “ When we started talking about Bitcoin a lot in 2012, it was like a nerd thing. And now people are like “Hey, where can I get some of that Bitcoin.” The digital currency which was first perceived as a form of political, economic and social alternatives has turned into a profitable machine (highly speculative and still under strong surveillance).