Can Bitcoin be Banned?

Noft Games extends the Future of Bitcoin series with another hot topic: Can Bitcoin be banned from the world?

As more people turn to cryptocurrencies in hopes to secure funds from global inflation, politicians and governments are getting more concerned. A more recent example is Charlie Munger, who slams cryptos and attacks the US authorities for tolerance towards cryptocurrencies, hyping up both cypherpunks and no-coiners with a single WSJ article. Reports on the US government performing “stealth attacks” on Bitcoin (setting grounds for further actions?) add fuel to the flame. 

But can the United States ban BTC? Let’s address the issue and analyze if the Bitcoin ban is possible and reasonable at all.

Why Ban Bitcoin In The First Place? 

Since day one, Bitcoin has been perceived as a threat to the global banking system for a single reason: world governments have zero control over digital currencies. Central banks losing control of this domain of money is putting world administrations in an unwanted position. The next thing is allegations that cryptocurrencies fund world terrorism and other unlawful actions as if it’s the only way.   

Is Banning Bitcoin Even Technically Possible? 

Satoshi Nakamoto started the whole cryptocurrency popularization with a single purpose in mind – to give ordinary people full control over their capital. Bitcoin was designed to be people’s money, far out of reach of any government or entity. The technology fundamentals for this to be impossible are laid strong.  

Why Countries Can’t Ban Bitcoin | 3 Main Reasons 

Bitcoin is decentralized by its very essence 

Cryptocurrency runs on the blockchain, which is a distributed ledger system, meaning that the transactions are stored on multiple computers around the world. According to the latest statistics, there are around 15,000 Bitcoin nodes scattered all over the globe. Hence, outright banning Bitcoin is as possible as shutting down 15k computers.

Source: @DocumentingBTC via Twitter  

Additionally, there is no central authority, which means there is no one to come to and force the ban upon. With this in mind, abolishing Bitcoin or any other cryptocurrency is virtually impossible. In this regard, we can only talk about restricting the usage of cryptocurrencies and prosecuting those violating the restriction. 

Crypto is permissionless 

Let’s imagine a scenario with actions the US government would take to shut down Bitcoin: 

1. The US government would begin by introducing legislation to Congress that would make it illegal to use, buy, sell, or mine Bitcoin. Then enforce the law by setting up a task force to investigate and prosecute anyone found to be using, buying, selling, or mining Bitcoin.

2. The government would also work with financial institutions to ensure that they are not allowing customers to use Bitcoin in any way and block access to Bitcoin exchanges and other websites related to Bitcoin.

There are quite a few countries where Bitcoin usage is prohibited accordingly. In fact, even if crypto operations are pronounced illicit in the country:

a) there is no way to track down the violators due to the anonymous nature of cryptocurrencies;

b) sanctioning BTC operations on a single territory wouldn’t prevent using crypto via VPN services.

One striking example proving the point is Nigeria’s attempt, which only caused increased crypto adoption in the country despite best efforts. China banning Bitcoin mining resulted in an outflow of miners to other countries with more progressive regulatory frameworks towards cryptocurrencies. 

Source: Chainalysis

Banning Bitcoin is not politically justifiable

Finally, the government could work with international partners to ensure that Bitcoin is not used outside of the US. This is also unlikely, as banning Bitcoin would also be economically damaging, limiting the potential for innovation and development in the cryptocurrency space. Any government banning bitcoin would fall behind the technological progress. 

Bottom Line

Thus far, banning Bitcoin appears to be an enormously challenging and hardly ever reasonable business due to the underlying technology – blockchain – features. Embracing the progress rather than outright banning it would be a wiser plan. The regulatory trend infecting the world governments looks like a more realistic scenario.