Like any currency or technology, Bitcoin can be used for illicit transactions.
However, quantitative studies indicate that the extent at which virtual currencies have been used for illicit purposes is no greater than that for national currencies.
Lightspeed Venture Partners say that 0.5% of all Bitcoin transactions are used for trading illicit drugs. On the other hand, the illegal drug trade constitutes 0.9% of world GDP. While these two numbers are not directly comparable, there does not seem to be any reason to suspect that virtual currencies are used for illicit purposes any more than traditional currencies.
Furthermore, the anonymity aspect of Bitcoin has been greatly exaggerated by the media. While the Bitcoin system itself does not directly identify its users, every transaction that has ever occurred in Bitcoin is stored and logged forever in the publicly accessible Bitcoin blockchain. Whenever Bitcoins are used for purchasing goods or services, or exchanged to a national currency, the store or exchange provider can identify the customer and conduct compliance checks.