Why isn't Bitcoin banned?
May 24, 2019
Bitcoin’s proposal from the beginning was to get rid of trusted third parties in our financial system. While te community mostly consisted of technologists in the beginning, libertarians and “sovereign citizen” types quickly got interested. Here we have independence, freedom, sound money, no central bankers, interesting discussions on bitcointalk, etc. – all in one project. Then came Silk Road with its infamous drug markets – made possible by Bitcoin! While the authorities went hard on Silk Road, just dark net markets turned out to be a Hydra. Bitcoin itself and a handful of privacy coins are now flourishing in the open. They can be used for money laundering, surpass boycotts, buy drugs, buy sex, surpass the central banks, offshore wealth storage, and many other things the state typically doesn’t like its citizens doing. With all the negative press, I would even guess that just banning all cryptocurrencies would not be a too hard a sell for the government. So how the hell did it get this far?
It might be that the decision makers imagine some positive potential in it. Maybe they hear about the innovation, technology, etc., and hope it will be a new internet that will give economic growth and flagship companies, and potentially strengthen the surveillance state. Or maybe they fear that “if we don’t do it, somebody else will”. China, Singapore, Dubai, Switzerland, …Isle of Man. I don’t know if that’s what they’re thinking, but I think we are in that situation now. Even if the US and all the OPEC nations banned all crypto and aggressively enforced it, companies and individuals would just move somewhere else, and the underground community would still be there. It would certainly be a hard blow, but it would not kill the currencies more effectively than it killed dark net markets.
In my opinion, the more likely exlanation is that the lawmakers and elites just don’t understand any of this blockchain-bitcoin-crypto thing. According to Richard Falkvinge, representatives at the European Parliament had their assistants print out their emails for them. Just look at the congress hearings of tech companies. Look at Andreas Antonopolous’ testimony to the Canadian senate. Read what criticisms some of the mainstream economists have against Bitcoin. They don’t understand the technology at all, and they dismiss the whole ideological thing around it as something fringe and ridiculous.
But the FBI, CIA, NSA must know something about it. I’m sure all those organizations have very capable people working with crypto, and that they can tell more than we think from all the data they can collect. I’m also sure these guys can effectively persecute a case where crypto is involved, and use it to their advantage. It just doesn’t seem like they try to influence the lawmakers in any way. They don’t have any nominal authority to do so, but aren’t these guys like the shadow governement?
It seems that by now it’s too late for the government to ban crypto altogether. Projects like Bitcoin and maybe Ethereum have just gained so much traction that the current system will just have to adopt and integrate it, as they are already doing. I think they can still ban anonymous cryptocurrencies, but they aren’t even doing that. And even if they do it, I think even they have enough traction to be able to go strong underground and overseas, and the same goes for exchanges for fiat<->crypto and public coin<->private coin.
Cryptocurrencies have given us many promises, but not many have been fulfilled yet. The original ones of independent value storage and true p2p payments are definitely fullfilled, and that alone will be quite significant. Just consider how crazy the idea of dark net markets actually is, and let it sink in. Functional, secure and safe worldwide drug trade for big and small orders was made possible just within 3 years of Bitcoin launching. TOR also played a part, and I don’t see it working that well without the postal system, but I can’t imagine this shift in how the world can be reversed now. If the value storage thing also takes off, we might see capital flight from weak currencies unlike anything seen before. Historically, bad governments have confiscated gold, freezed assets, invalidated bank notes, drastically inflated the currency, enforced strict capital controls, and more. Doing any of that if the populace knows how to use Bitcoin sounds difficult. Trace Mayer says that in such a scenario, the old financial system will evaporate rather than collapse, so that just a few things stand left while Bitcoin takes over most functions. The optimistic view of such a scenario is that bad autocrats will have to act better, as people now have a choice. It will be insteresting to see this play out in whatever poor country is the first to fall. They would probably ban Bitcoin at that point, but by then it will be unstoppable.
PS – case from Norway: Localbitcoins legend banned from banking – in Norway! Even though his business is explicitly licensed and legal It looks like there’s some kind of struggle between the actual government organization for finance regulations and the private initiatives from the banks themselves. One of the biggest banks in Scandinavia bans their employees from holding crypto and users of Norway’s most popular payment app risk being banned if using it to trade crypto. It’s kinda surprising to see banks act in this way towards a relatively new technology, especially when the government completely permits using crypto as long as they don’t use it to break laws. Which is the sensical policy, right? People can also use cars and telephones as long as they don’t use them to break laws. A possible reason for the banks’ response could be that they are worried that cryptocurrencies will challenge their “monopoly on money”, and create real competition in the financial and payment markets, which is frightening to them. But I think the more probable reason is that they are afraid their customers and employees get entangled in money laundering, scams, non-reversible payments, and stuff like that. Which is what they state as the reason as well.
The bitcoin-fiat exchanger from the articles above is currently awaiting trial against one bank, and appealing a court decision against another bank. He actually lost the first trial on the grounds that one of his customers had used bitcoins to buy illegal drugs. So it’s kinda like banning my employer from using banks if I use my salary to buy drugs. It will be interesting to see what happens next. The bitcoin exhanger fears he must move his business overseas if he loses the trial, which confirms my point from the article above. The banks and governments need to either aggressively ban all crypto worldwide, or they might as well embrace it fully. A half-hearted approach will just make crypto adoption more difficult, but still possible – especially if companies can move between jurisdictions.
Written by Viktor Frede Andersen. You can reach me on Twitter @vikfand