Bitcoin became part of the financial markets less than a decade ago, but it has quickly found its niche as an alternative asset class. Can any government possibly step in and ban it?
Flashback: Gold bullions were illegal
Those of you who believe that no government will ever be able to take such an extreme step as banning the cryptocurrency, may want to hear this little history lesson. In 20th century, holding gold bullions was considered illegal in America. The crime was punishable by up to 10 years in prison. In 1933, an order was issued by the U.S. President Franklin D Roosevelt, requiring all citizens to hand over their gold bullions to the Federal Reserve Bank. The nationwide ban remained in place for over 40 years, until it finally got lifted by another U.S. president, Gerald Ford. The reason behind such move was quite simple: America no longer needed gold to back up the currency it printed, as it abandoned the gold standard.
The virtual Great Chinese (fire)wall
Another argument used by those who believe that Bitcoin cannot be banned in the age of internet globalization, is that the governments have very little control over decentralized cryptocurrency. However, if you take a look at China, you will see that the authorities are trying to build a virtual wall by controlling internet service providers. All VPNs in the country must be blocked by 2018. In addition, the government monitors internet traffic in order to stifle political dissent. And, now that you know this, banning Bitcoin doesn’t sound like too big of a leap for Chinese regulators, does it?
Demonetization in India
You may think that fiat notes approved by the Central Bank and printed by the government are safe from being banned. India’s experience shows that this isn’t the case. In November 2016, the government has issued a decree, according to which the high denomination notes are no longer considered to be legal tender. As a result, the citizens ended up queueing up in banks to deposit the old notes. Obtaining new money wasn’t an easy task either, leading to even more huge queues at ATMs. The Indian Government’s goal was to solve most of the economic issues in the country, including income tax evasion. A year later, it is evident that the demonetization has failed to serve its purpose.
Enforcing the ban
If a government decides to ban Bitcoin trading or possessing, questions will be raised about the way it will be enforced. No government can possibly seize your Bitcoins, unless you hand your private keys over to them. However, the majority of the citizens prefer not to break the law, so the demand for Bitcoin would likely decrease if a government decided to ban it. Considering that such legal action would also result in shuttering Bitcoin platforms and exchanges, governments do have the means to potentially suffocate Bitcoin.