Ingram Niblock writes:

Simon Palombi overstates the threat from terrorist's use of Bitcoin. First, a key aspect of Bitcoin is that every single transaction made using the currency is held by every single user of the currency in what is known as the block chain. While the user and the unique address are disassociated if the correct precautions are taken, network maps based on transactions can be developed. Even if people are careful, their associates and the people they transfer money to may not be. This network map will be a big intelligence boost and large Bitcoin transfers will attract attention.

Second, for Bitcoin to have real world effects, it must cross into the physical somewhere and this is where traditional intelligence gathering, law enforcement and customs will continue to play a key role. Just as drugs are seized where some other currency is used, so too will drugs and weapons be seized if Bitcoin is used. Australian police have already made arrests where Bitcoin was used and the market place was on the anonymous TOR network.

Bitcoin poses challenges that need to be addressed but it may not be the game changer that the author implies.