Are you worried about a ban? Then you need the Bitcoin more than you think. Skeptics often argue that governments will ban Bitcoin when it becomes too important and threatens national sovereignty. At least these critics understand the importance of Bitcoin and the power that state monopolies exert on us. What they don’t understand is the power of distributed open-source technologies and the game theory governments face in making these decisions.
In short: bans are ineffective. They only hand over global technological power to colleagues. Authoritarian governments are more likely to try regressive regulation. If you live under that kind of regime then you need the Bitcoin more than you think.
You cannot ban the Bitcoin.
Self-regulation is the most important part of distributed open-source technologies such as the Bitcoin. But how does this self-regulation take place?
- The Bitcoin offering is pre-programmed with a hard limit of 21 million units.
- Blocks are mined every 10 minutes on average.
- Miners are rewarded with new Bitcoins.
- Supply growth halves every four years.
- Anyone can view and validate transactions by running a node.
- No one can be censored from the network, as long as you have internet access and you follow consensus rules.
The six principles of the Bitcoin market mentioned will always remain intact. Even if the regulators tried to intervene. A government can try to ban its citizens from using the network, but the Bitcoin will continue to run on the internet. Hester Peirce of the Securiteis Exchange Commission recently said “governments would be foolish to ban Bitcoin.”
Bans are ineffective and potentially impossible
Even if a government were to ban Bitcoin, it would not be effective. The US government once banned alcohol, but booze was widely available at the time. The Bitcoin isn’t even a physical entity, so how do governments want to seize it? It’s unbearably difficult to forbid people to use code on the Internet. Ask China: They tried to ban Facebook, but Chinese still have access to Facebook through VPNs. There are even questions about the legality of a possible Bitcoin ban in the US, because the Bitcoin is ultimately code. And code is a protected category of free speech and can be covered by the First Amendment.
Global regulatory competition increases the stakes
A Bitcoin ban would be foolish and ineffective, but governments could certainly increase barriers to entry and increase friction. Regulators can implement know-your-customer and anti-money laundering requirements or raise taxes, which would likely slow adoption. However, it is hard to believe that governments can enforce remarkably stricter policies on the Bitcoin against other financial assets.
While governments have crossed borders before, there is little precedent, nor much incentive, to be able to do this with Bitcoin. Besides, if they did, would they be willing to bear the consequences? Will the world’s leading powers turn away from this powerful technology when others embrace it? US policymakers are concerned about the possibility of ceding the initiative to China. This kind of regulatory competition has prompted Miami Mayor Francis Suarez to embrace Bitcoin in his tech-savvy city.
Maybe you need the Bitcoin more than you think?
Ineffective? Yes. Unlikely? Yes. However, a Bitcoin ban is still possible.
Governments banning new technologies tend to adopt a certain character. Such governments are more authoritarian and less supportive of individual freedoms, such as those of China and Venezuela. It is in these countries where people need the Bitcoin the most. Venezuelans don’t care what the government says. They need the Bitcoin to protect themselves from hyperinflation. Afghans and Belarusians need access to digital bank accounts to free themselves from their oppressive governments. Turkey and Nigeria are both great recent examples of places where Bitcoin is becoming a need and a must. In the past month, Erdogan’s Turkish government announced measures to stop traders from accepting the Bitcoin, and Nigeria clamped down on the exchanges. In response, interest in Bitcoin has skyrocketed in both countries. The moral of the story is that if you think your government is going to ban Bitcoin, you need it more than you think.
At some point, governments can be threatened by the Bitcoin ecosystem. Understandably, the government wants a barrier against imminent danger. However, if we dig into the possible scenarios, we find that the best scenarios occur when the Bitcoin is accepted by everyone.