Can cryptocurrencies replace banks as payment mechanisms for gun sales?
That question is increasingly being debated as businesses reconsider their relationships with gun manufacturers and firearms advocacy organizations after the tragic Valentine's Day shooting in Parkland, Florida.
While cryptocurrencies are popular for firearms purchases on the dark web, their use in online purchases is restricted, mainly due to restrictions by widely used online payment networks. For example, PayPal Holdings Inc. (PYPL) does not allow purchases of firearms or other parts using its network. (See also: Industries That Could Benefit From Stricter Gun Control Laws).
Pros and Cons Of Using Crypto For Gun Purchases
Given the notorious press generated by cryptocurrencies, it might be tempting to conclude that they are a natural fit for gun purchases. Recent developments and news reports have lent credence to this view.
For example, Guncoin is a coin that has been developed exclusively for the firearms industry. A cursory search for bitcoin on gunbroker.com reveals 304 entries that are “bitcoin eligible,” as of this writing. (See also: All About The Gun Business In America.)
But reality is far more nuanced. There are several benefits to using cryptocurrencies for gun purchases.
First, the decentralized nature of crypto blockchains is a perfect cover for individuals or cryptocurrencies seeking to expedite the bureaucracy and checks imposed for real-world purchases. Gun purchases are categorized as high-risk sales and are governed by the Bureau of Alcohol, Firearms, and Tobacco. Then there is the fact that the anonymity of privacy-focused coins, such as Monero, could help gun owners evade detection from lawmakers. (See also: Litecoin Gains Ground On Bitcoin In The Dark Web.)
Direct Correlation Between Bitcoin Prices and Gun Sales
Anecdotal evidence points to a synergy between bitcoin’s price and gun sales. In an interview with Coindesk last year, Michael Cargill, the owner of Texas Gunworks, said that around 45% of his company’s revenue came from cryptocurrencies.
According to Cargill, the price of bitcoin and gun purchases had a direct correlation: both increased at the same time. Defense Distributed’s Cody Wilson, who achieved infamy by making the world’s first 3D-printed gun, reached a similar conclusion.
But blockchain’s technology is a double-edged sword. Even as they simplify gun purchases, cryptocurrencies could also make them transparent. Currently, there is no centralized database of gun owners. But blockchain could make such an entity possible by making it easy to track gun owners (and their financial history), if they have not sufficiently masked their identity. In fact, a paper by a public health policy professor at the Washington State University at Spokane proposes an implementation of blockchain technology to conduct background checks and validate proof of identity for gun sales.
Investing in cryptocurrencies and other Initial Coin Offerings ("ICOs") is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author owns 0.01 bitcoin.