“You would have to shut down the internet. ”Hester Peirce, Commissioner of the US Securities and Exchange Commission for the implementation of a Bitcoin ban.
Although Bitcoin’s market capitalization surpassed $ 1 trillion, statements from government agencies and business leaders continue to fuel speculation about a US ban on Bitcoin. US Treasury Secretary Janet Yellen has publicly criticized Bitcoin and other cryptocurrencies for their role in “illegal funding”. In the private sector, Ray Dalio, founder of the world’s largest hedge fund, has commented that Bitcoin may be as banned as gold was in the 1930s. Jesse Powell, the CEO of Kraken, a US-based cryptocurrency exchange, has also warned that the digital assets “could be cracked down”.
Could the United States implement such a “crackdown” by joining countries like India, Nigeria and Turkey to implement a Bitcoin ban? A total ban is certainly feasible, but the practical, legal, economic and political difficulties involved in implementing such a ban make it unlikely. Instead, we can expect the US to continue regulating Bitcoin together with other industrialized countries. Regulators are faced with the challenge of writing laws that can be enforced without taking advantage of the new opportunities for economic growth that Bitcoin offers to countries that accept it.
A basic understanding of blockchain technology underscores the practical challenges of a Bitcoin ban.
“Blockchain” describes a decentralized and distributed ledger that records the histories and transactions associated with digital assets. Bitcoin is a virtual asset that is accessed and recorded in such a blockchain.
The term “cryptocurrency” is a slight misnomer as Bitcoin is more like a decentralized network than a traditional currency that can be held or confiscated by a regulated custodian. Instead of holding physical “coins” or having access to an “account” with a regulated third party, a Bitcoin holder uses private keys to unlock digital assets recorded on the blockchain managed by a decentralized and global computer network becomes. These private keys are often represented in a series of words called a “recovery phrase” that can be stored and used to access Bitcoin over an Internet connection anywhere in the world. Thus, Bitcoin can no longer be confiscated than memories.
While the United States could criminalize possession of Bitcoin, it would be next to impossible to enforce such a ban. In particular, there would be no way for the government to seize Bitcoin from its global decentralized network. The government would not be able to capture recovery phrases that have been memorized by owners who refuse to disclose them or claim they have been lost or stolen. In addition, bans in other countries show that this step could be counterproductive. For example, when the Central Bank of Nigeria banned local financial institutions from serving cryptocurrency companies, buyers and sellers began using peer-to-peer trading platforms to trade Bitcoin at a price bonus in this country.
Political speech that has been part of the Bitcoin network since its inception and the inherent associative nature of the Bitcoin network would also make any ban on this asset subject to strong first-change challenges.
Bitcoin was created as a public network in which participants make immutable entries in an electronic ledger. While the most visible manifestation of these entries is the exchange of value, Bitcoin is more than just money. According to the well-known Bitcoin lawyer Andreas Antonopoulous, “Bitcoin can be described as digital money, as if one were to say that the Internet is a fancy telephone. It’s like saying that the internet is all about email. Money is only the first application. “
In fact, the Bitcoin network has been used for political speeches from the beginning. The first “Genesis” block (or record of transactions) on the Bitcoin blockchain contained the following statement: “The Times 03 / Jan / 2009 Chancellor on the verge of a second bailout for banks.” On the day Nasdaq went public, Coinbase had a mining pool embed the following headline on the Bitcoin blockchain: “NYTimes 10 / Mar / 21 House Issues Final Approval for Biden’s Pandemic Relief Bill for $ 1.9 billion.” These messages, which serve as a commentary on the role of central banks and government agencies, cannot be censored and read by those with an internet connection. In contrast to the occasional handwriting scribbled on a perishable paper dollar, political statements have been permanently and irretrievably engraved on the Bitcoin blockchain from the very beginning and at significant moments in its history.
The political speech Bitcoin has given since its inception as a networked association beyond the reach of centralized authorities should scrutinize any attempt at a ban. Since the first change was largely applied to new technologies, a similarly broad application to blockchain technology itself can be expected. A particularly in-depth discussion of why Bitcoin is language can be found here.
Opponents of a Bitcoin ban in the US would also have arguments in favor of due process under the fourth, fifth and fourteenth amendments to the US Constitution. The IRS categorizes Bitcoin as property and therefore any ban would arguably constitute an unconstitutional seizure. The US government itself confiscated and sold Bitcoin, further legitimizing its status as constitutionally protected property. While the government could counter this argument by offering owners a window in which to convert their Bitcoin to US dollars, the potential loss of hundreds of billions of billions of net worth to individuals and public companies would hardly translate into “fair compensation.” , which is guaranteed by the EU Constitution.
Even if the US government could legally ban Bitcoin, it would be economically unaffordable.
Much of the value in Bitcoin was created and held by US companies. For example, Tesla bought $ 1.5 billion worth of Bitcoin, Coinbase is a publicly traded and US-based cryptocurrency exchange with a market value of over $ 85 billion, and mainstream banks like JPMorgan Chase and Goldman Sachs carry cryptocurrencies Investment products on the market. Additionally, payment companies like Visa and PayPal are helping thousands of small businesses accept Bitcoin for goods and services. Although opponents can claim Bitcoin is used by terrorists and drug dealers, blockchain analysis suggests that only a small and shrinking portion of Bitcoin transactions are used for nefarious purposes.
Bitcoin’s numerous uses for storing value, authentication, and intellectual property sharing promise to create many new businesses, just as the Internet did in the late 1990s and early 2000s. Any ban or devastating regulation by the US government would miss the opportunity to remain the world leader in new technologies.
Just as Bitcoin has grown exponentially, so has its political influence. That influence, combined with practical, legal, and economic factors, will likely lead the U.S. government to create regulatory security rather than an outright ban on Bitcoin.
Companies and individuals with significant exposure already have significant political influence. According to CoindeskSam Bankman-Fried, CEO of FTX cryptocurrency derivatives platform, made the second largest donation to Joe Biden’s presidential campaign. Recently, Fidelity Investments, Square and Coinbase teamed up to create a bitcoin trading group that advocates for policy makers.
As the number of Bitcoin users continues to grow rapidly, any attempted ban would meet not only resistance from corporate lobbying, but the wrath of an exponentially growing and passionate bloc of the voting public. In fact, Coinbase, the largest cryptocurrency exchange in the US, reported approximately 56 million verified users in 2021, up from 35 million in 2020. Coinbase co-founder Fred Ehrsam tweeted that 10% of people now own cryptocurrencies in the US. While the veracity of this claim may be debatable, there is no doubt that this rapidly growing group would exert significant political pressure in response to a proposed ban.
Until there is greater regulatory clarity regarding Bitcoin, the statements of some prominent government officials and business leaders will continue to fuel speculation about the impending demise of this burgeoning asset. Although a total ban would not be feasible for the reasons mentioned above, further regulation is to be expected. If this regulation is tightly tailored to avoid strangling the burgeoning Bitcoin economy, it could give the digital asset a newfound legitimacy, minimize its use for illegal purposes, and bring additional price stability.
This is a guest post by Stuart Russell. The opinions expressed are solely their own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.