Since the early days of bitcoin, there have been concerns that it is only a matter of time until governments around the world ban the cryptocurrency.
On the one hand, bitcoin is often cited as a threat to traditional monetary systems, with the potential to undermine central banks’ control over the money supply. There are also concerns that bitcoin facilitates drug trafficking, money laundering, and ransomware, due to its pseudonymous nature.
Reading: What happens if u.s. bans bitcoin
but whether or not it is possible for governments to ban bitcoin can vary from region to region.
bitcoin has already been banned in some countries
The question of whether bitcoin can be banned has been answered to some extent, as the cryptocurrency has already been officially banned in several countries.
Currently, only a handful of countries impose a complete outright ban on bitcoin and prohibit interacting with, possessing, or using the cryptocurrency in any form, shape or form. These countries include Algeria, Ecuador, Egypt, Nepal, and Pakistan.
Several others, including Saudi Arabia and Taiwan, have also introduced a partial ban on cryptocurrency, generally preventing financial institutions from trading cryptocurrency or facilitating bitcoin transactions.
So far, the vast majority of countries that have restricted the use of bitcoin, or banned it outright, rank relatively low on the economist‘s democracy index, and many are considered flawed democracies. or worse.
bitcoin crackdown in china
Of all the countries that have taken a negative stance on bitcoin, China has made some of the most aggressive moves against the cryptocurrency in 2021.
Prompted by its commitments to carbon neutrality (and, experts have noted, the imminent launch of its bitcoin rival, the digital yuan), China has cracked down on cryptocurrency mining and cryptocurrency-related companies. cryptocurrencies.
china has long maintained a ban on cryptocurrency trading, but in 2021, the country forced crypto miners to shut down their operations and move out of the country, while the people’s bank of china (pboc) issued an edict to payment platforms and banks ordering them to cease cryptocurrency activities.
Before the mining crackdown, China controlled roughly two-thirds of the global bitcoin mining industry. What followed was a mass exodus of miners, while crypto exchanges huobi and okex limited services for Chinese clients. even individual crypto-related accounts were blocked by the popular social networking website weibo.
But the broader impact of the ban has been limited. Despite China’s best efforts to clamp down on the cryptocurrency industry, people living in the country can still access cryptocurrency exchanges abroad through the use of virtual private networks (VPNs).
Meanwhile, the bitcoin mining hash rate has steadily recovered from its initial drop following the Chinese mining ban. While the price of bitcoin has yet to recover to pre-ban levels from April and May 2021, it has risen steadily since the end of July.
could u.s. ban bitcoin?
currently, bitcoin is legal in the united states. The Securities and Exchange Commission (SEC) declared that it is not a security, and the Commodity Futures and Trading Commission (CFTC) declared in 2015 that it is a commodity, like gold, and therefore subject to its regulations. furthermore, in 2013, u.s.a. The Treasury Department’s Financial Crimes Enforcement Network (Fincen) has issued guidelines stating that it is legal to invest in bitcoin and use it as a form of payment, as long as the seller of the goods or services is willing to accept it.
Due to the patchwork of state and federal laws in the us. In the US, the exact regulations on bitcoin differ from state to state; For example, in Hawaii, bitcoin and cryptocurrency-related businesses must apply for a money transmitter license, while Wyoming has given digital currencies the same legal status as money.
With all that in mind, the risk of a blanket ban on bitcoin in the us. uu. seems to be minimal. In fact, US companies have invested billions of dollars in bitcoin, while there is still speculation as to when the US will establish its first bitcoin ETF, or exchange-traded fund.
However, there are still some risks as bitcoin comes under fire from regulators and some lawmakers. SEC Chairman Gary Gensler has said in no uncertain terms that Bitcoin is a speculative asset and that cryptocurrencies facilitate crime and do not qualify as money. and senator elizabeth warren has expressed concern that cryptocurrencies will put the financial system “to the whims of a shadowy, faceless group of super coders and miners.”
although there is no evidence to suggest that the us. is considering an outright ban on the flagship cryptocurrency, it could theoretically be possible to impose strict regulatory requirements on the on-ramps and off-ramps of the bitcoin ecosystem, making it very difficult to obtain and use the cryptocurrency, without officially banning it.
however, doing so could have a significant economic cost.
“Bitcoin is too entrenched in the US financial system to be banned.”
“Bitcoin is too ingrained in the US financial system, both culturally and technologically, to ban it,” Marshall Hayner, CEO of MetalPay, told Decrypt. “It would mean shutting down institutions that oversee billions of dollars in assets, eliminating tens of thousands of jobs, shipping innovation overseas, and fueling a bitcoin black market.”
enforcing a ban would be difficult
Although it is clear that it is quite possible for a government to issue an edict banning bitcoin, actually enforcing such a ban would be difficult, if not impossible, in many countries. Unless the government exercises tight control over the internet, people will almost certainly be able to download bitcoin wallet software, run a node, and complete transactions with little effort.
This is evidenced by the fact that there are still a significant number of bitcoin users in most countries that have already banned it. According to a 2019 report from We Are Social, around 4% of internet users in Egypt currently own cryptocurrencies, while cryptocurrency market tracking platform CoinMarketCap listed Pakistan as one of the fastest growing user demographics. growth in the first quarter of 2020.
Similarly, even in countries with strict internet controls, a variety of tools used to circumvent these restrictions could make the effort pointless. after all, it’s incredibly difficult to enforce a bitcoin ban when virtually anyone can access the bitcoin blockchain via blockstream satellite using a relatively inexpensive software defined radio (sdr) dongle and antenna .
“The United States could enact tougher restrictions on buying and selling BTC, but an outright ban would be impossible to enforce,” Hayner said.
There is also the question of whether introducing a ban on bitcoin would simply incentivize people to obtain it, an argument put forth by economist saifedean ammous, author of the bitcoin standard. his line of reasoning is that a government crackdown on bitcoin would illustrate that the government in question is trying to restrict people’s financial freedoms and serve to highlight the usefulness of the cryptocurrency. “If your bank tells you, ‘You can’t buy bitcoin with your bank account,’ it’s really just an advertisement for bitcoin,” he said.
Instead, he argued, governments could try to undermine the demand for bitcoin by reducing the economic incentive to use it, creating a better alternative.
but with bitcoin now legal tender in el salvador, and ukraine set to follow in its footsteps, bitcoin seems to be gaining more and more acceptance among governments, and with each new country that adopts it, the likelihood that other countries impose a ban on decreases.