Steve Gibson had an excellent technical discussion on Bitcoin here: http://www.grc.com/sn/sn-287.htm. From that I can say that the article is incorrect when it says the only way to get them is through the exchanges at $10 a bitcoin; however, it is much faster and more certain. I suppose that it is inevitable that something like Bitcoin would be used drug trafficing or the like, because of the untraceability and inability to control this kind of currency. There is probably an interesting analysis to be had here; an economy based on Bitcoin might be more brittle, since the system doesn't inherently allow for inflation or expansion of the money supply.
But back to the article: how much is concern over the drugs and how much is concern for the government not getting its cut? And at this point, is there anything the government can really do about it?
Senators seek crackdown on "Bitcoin" currency
Silk Road buyers pay with Bitcoins and sellers mail the drugs, the Gawker blog reported. The transactions leave no traditional money trail for investigators to follow, and leave it hard to prove a package recipient knew in advance what was in a shipment.
"The only method of payment for these illegal purchases is an untraceable peer-to-peer currency known as Bitcoins. After purchasing Bitcoins through an exchange, a user can create an account on Silk Road and start purchasing illegal drugs from individuals around the world and have them delivered to their homes within days," the senators' letter states. "We urge you to take immediate action and shut down the Silk Road network."
The DEA is "absolutely" concerned about Bitcoins and other anonymous digital currencies, agency spokeswoman Dawn Dearden said when asked for a response to the senators' concerns.
Silk Road may be hard to close. It could easily move from server to server around the globe and change its Web address and name at will, while remaining accessible through Tor.
However, Bitcoins must be purchased with real money; of late, they have been selling for roughly $10 each.
One user described this process as simply "growing pains" and asserted that the government "can't stop a peer-to-peer service."
U.S. law enforcers might have difficulty stopping Bitcoins without help from their peers in other countries.
While little information about Bitcoin exchanges is publicly available, an item posted on a website called Bitcoin Watch states that Mt. Gox's bank account is in Japan, and anecdotal evidence suggests many other exchanges operate outside of the US.
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