The dark web is an online haven for criminals that is rarely seen by everyday users of the Internet.
Enter the dark web and you can find sites advertising murder for hire and drugs for sale such as marijuana, cocaine, LSD and other hallucinogens. The websites can also link to computer hackers or sell counterfeit licenses and credit cards.
Perry, who has prosecuted hundreds of white-collar and money laundering cases, said it is not surprising that these vendors gravitate toward bitcoin because it allows them to cloak themselves in secrecy.
In October 2013, the U.S. government lifted the cloak on, and then shut down, one of the most well-known black market bazaars on the dark web, bringing unwanted attention to bitcoin.
“What you have is a handful of examples where bitcoin is used, misused frankly,” Miller said. “The charges, the most notorious of them is Silk Road.”
Over a 2½-year period Silk Road allegedly sold $1.2 billion worth of drugs and other illegal services, all paid for in bitcoin.
Ross Ulbricht, 29, was arrested, and charged on various counts linked to running Silk Road. The graduate school dropout has pleaded not guilty, with his lawyers alleging charges of money-laundering are invalid because there was no actual money involved, just bitcoin.
How regulators and lawmakers define the digital currency will pose problems for attorneys prosecuting bitcoin-related crime. Is it a currency? A commodity? Property or investment? All questions that will need to be answered if there is to be greater acceptance of the digital currency.
—By CNBC’s Mary Thompson.