He uses the gold ban as precedent. The US didn't outlaw private gold ownership because gold was competing with the dollar.
It outlawed gold ownership because the dollar was backed by gold, the Fed wanted to print more dollars to stimulate the economy, and at the time it could only do that if it had enough gold to back those dollars. They were running out of gold so they confiscated it from regular people.
I'm amazed I've never heard about this. If I lived then and was going to have my gold confiscated, I don't think I'd be able to avoid going full killdozer.
The 1% are still pretty pissed about it - nearly 100 years later. If you're an American then I am surprised/concerned you never heard about this in history class.
Yeah, I am concerned on that same point as well. I had spent a lot of time reading about various historical events both in school and outside of it, so it's surprising that I never encountered this.
The real question is which cryptocurrencies can survive a net outflow. That's how bubbles suddenly collapse. Someone sold US$2.1 billion in Bitcoin on March 15th, and the price of Bitcoin dropped 10%.[1] Which is not too bad.
The SEC made most of the Initial Coin Offering industry go away by prosecuting some of the blatant frauds. The ICO backed by nonexistent diamonds and real estate was the first to go down. After a few of those, the SEC sent out letters asking ICO issuers why they thought they weren't issuing an unregulated security. A few registered. Most gave up.
The SEC has essentially grandfathered Bitcoin as pre-dating any SEC guidance on the subject, and as lacking an "issuer". Newer make-money-fast schemes get full scrutiny.
By "effectively grandfathered", are you referring to their justification of bitcoin and ethereum as not securities under the Howey rule, or are you referring to some other comments? (Genuinely curious)
A huge number of assets would drop similarly if you unloaded .1% of their entire market cap in one day. I’d say BTC recovered fairly well from that sale.
South Korea backed off from just such a ban in 2018[1], the details of which might be informative if anyone is trying to determine how likely a similar ban here might be
Greece implemented capital controls in June 2015. The United Kingdom struggled to keep them implemented in October 1979. I'd look at these episodes and the Asian Financial Crisis from 1997 as examples of the kind of thing Dalio is probably thinking about.
While I'm sure everyone here on Hacker News is hoping this happens, it won't. Large companies are adopting cryptocurrency. Telsa accepts it as payment. Visa is starting to settle transactions on Ethereum. Coinbase is about to IPO.
And if it does, it won't matter. How do you even ban Bitcoin? Are they going to set up a great firewall? Cryptocurrency isn't the type of thing you can just ban.
They would ban exchanges from operating within the US, which would render Bitcoin useless for 99.99% of US users. I don't think they'll do this either, but they don't have to do anything fancy to make Bitcoin worthless for the average citizen.
While being able to use exchanges in the US is helpful, it isn't necessary. It might curb short term adoption, but it doesn't stop the inevitable, which is crypto completely taking over the world.
It's in the US's best interest to embrace it.
Edit: the best downvotes are from people that missed out on the technological innovation of a lifetime.
Peer-to-peer exchange works perfectly fine. It is funny how it used to be the most common way to exchange crypto, but now people think you need these dangerous and inefficient centralised exchanges just because they became popular.
I don't disagree, I just think that your average retail investor will never touch a P2P exchange, just like your average retail investor will never own a crypto wallet outside of coinbase.
Do you have a logical use case scenario for p2p/otc if the gov bans exchanges? If there truly can be decentralized liquidity in one of these decentralized exchanges... then it’s def gonna stay alive
That's a strong reason for governments to ban them.
Governments derive their power from their ability to raise taxes; and they need to be able to measure how much people and companies make for that. Governments can't tolerate a widespread bitcoin.
So what? You can easily put a layer of legal red tape around something, so that individuals cannot reasonably use it, but allows corporations with large legal departments can continue.
Slightly off-topic: with currency being mostly digital and now crypto-currency being more common, it'll be interesting to see what happens in the event of a massive power failure (e.g. coronal mass ejections, mega-earthquakes, super-hurricanes, etc.). I imagine if you had a bank statement as support, you could at least withdraw money from the bank in the form of cash. Where with crypto you don't have that potential safety-net and any mining operations will take a huge hit, possibly causing catastrophic volatility in its worth.
If your threat scenario is a long-lasting large-scale power outage, the correct answer is a stash of canned food and clean water. Cash money is going to be less useful than you think when the grocery store supply chains collapse.
No, this makes no sense. No bank would allow you to withdraw cash. Because what is stopping you from withdrawing cash at one branch and then again at the same branch down the road, or a different branch a state away?
Not really - you can have a cold wallet that contains your private keys. Unless every single computer lost a copy of the blockchain blocks dir simultaneously, this seems pretty much of a non-issue
so you're saying a black swan event might affect the price? gee well Im glad that doesn't currently happen with USD, CNY, JPY....
you can also use bitcoin like a physical bearer asset (gold bullion) by using things like https://opendime.com/ so even if the network was 100% down transactions could still happen IRL. You'd just be exchanging a hidden private key that can move UTXO's on the blockchain.
considering that I'd say bitcoin is much more anti-fragile than a bank statement, in most of the natural disasters you're talking about im not so sure banks will be letting you withdraw any significant amount of $
It's irresponsible to hold your assets in any one vehicle. Your 6 month buffer savings should be in cash or something equally liquid. If I had all my safety net in real estate or paper gold, it'd be the same problem.
Was hoping for an insight into the cryptocurrency markets by a financial markets insider but this was a rambling interview of little informational value. I'd be curious to know what the general sentiment is among high-level financiers and politicians towards bitcoin, if there is even a consensus. Right now most of the perspectives I have heard are either from the uninformed individual or from the biased crypto enthusiast.
Here is a class at MIT taught by Gary Gensler, the pick for SEC head, focused on blockchain. Its a nice starting point for a detailed view from the perspective of a top regulator with deep industry experience.
Having spent some time around a subset of what I think you would call high level financiers, for the most part they don’t really know what it is or understand it, and it isn’t relevant to their day to day job of doing transactions.
there is over $1 trillion held in Bitcoin, which represents a lot of people and companies. how exactly do you unwind that without generating a massive backlash and other secondary effects? would the government buy out everyone's position or what?
I can't put my finger on it but I doubt the valuation of bitcoin/other crypto assets when converted to USD. Look at NFTs: there's no way those prices would hold if someone were actually paying USD. Those prices are only possible because people are exchanging one funny-money cryptocurrency for another.
I think the basic issue is there is huge amounts of cryptocurrency that can't be converted to USD for one reason or another (proceeds of ransomware, inability to pass KYC checks, etc.), and that is causing some crypto assets to be worth far less USD than others, and inflating the price of assets when purchased with those coins. But that isn't stopping people from pricing them just the same.
>Look at NFTs: there's no way those prices would hold if someone were actually paying USD. Those prices are only possible because people are exchanging one funny-money cryptocurrency for another.
Not really - because you could exchange you crypto for USD easily & reliably enough. The second that's true it stops being "funny-money" as you put it.
Contrast that with monopoly money where nobody will give you USD for it.
NFTs - either people are doing it for the giggles or they're betting on greater fool theory
Aren't majority of bitcoin held by a small majority, that is both international (read China) and anonymous.
So, who will participate in this massive backlash in the US besides Elon Musk and Dorsey whose companies have public positions in bitcoin, and a few others?
1. It's a false narrative that majority of bitcoin is held by a small majority, as this doesn't account for custodianship services, funds, lost coins, etc. [1]
2. Many companies and citizens and even the US gov itself have over $1M in bitcoin, to name a few: Square, Microstrategy/Michael Saylor, Greyscale, Tim Draper, Winklevoss/Gemini, etc [2]
Safe to say, Bitcoin and crypto is Big Business now in the US, with hundreds of companies and startups in the space based in the US.
Governments have as much control over tax codes as developers have over source code (literally — a tax code is just some written instructions, so it can be any computable function if you really want to do that). Governments can break entire sectors accidentally, doing so deliberately is trivial.
For example, they could make a special cryptocurrency tax which is 100%. And/or a heavy tax on all currency exchanges “expect for the national currencies of the nations in Annex D”, and Annex D turns out to be a list of countries that they have a specific trade agreement with.
They can remove long-term capital gains on it and make it all short term treatment or partly short term treatment (I think that is how it works for futures IIRC.)
They could create different categories of taxes (e.g., what we have for dividends), except with higher categories.
There used to be(in the 80s and 90s) these groups that used trade scrip to avoid paying taxes. They were always getting in trouble for making alternative currencies, and trying to avoid direct exchange to keep out of trouble. If I recall someone explaining this to me years ago.
I've always wondered why this hasn't happened with bitcoin.
The only effect of not using USD to conduct financial transaction has on your taxes is that it makes them more complicated. It will not reduce your tax burden one iota. (In the US, of course)
At least one reason is that a big chunk of crypto value is being driven by wealth flight out of the PRC. A lot of the dollars propping up BTC's valuations represent trade deficit dollars that would otherwise be leverage for a plausibly hostile government.
Surely the feds are aware of the scale of money laundering being done in the cryptocurrency world, but I'm guessing they'd prefer to see that being laundered by western criminals than leveraged by China.
Is there more information on this? The IRS are planning on adding this question to form 1040:
"At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?"
How literal is "currency?" I would consider currency different than "assets" from a tax perspective. Can anyone provide some clarity or articles which provide any?
> Virtual currency is a digital representation of value, other than a representation of the U.S. dollar or a foreign currency (“real currency”), that functions as a unit of account, a store of value, or a medium of exchange. Some virtual currencies are convertible, which means that they have an equivalent value in real currency or act as a substitute for real currency. The IRS uses the term “virtual currency” to describe the various types of convertible virtual currency that are used as a medium of exchange, such as digital currency and cryptocurrency. Regardless of the label applied, if a particular asset has the characteristics of virtual currency, it will be treated as virtual currency for Federal income tax purposes.
Video game currencies are definitely sitting around the line. I don't know anything about WoW gold, so I can't say if it crosses the line into virtual currency. However, given that searching for "WoW gold" had the entire first page of results being nothing but people selling it, I do feel like it rather deserves to cross the line into virtual currency.
I mean if you sell wow gold it’s taxable. It’s income and taxable at your bracket.
If you use it purchase items in games it’s probably not. Especially if those items can’t be purchased directly. It’s similar to gift cards. Especially if you purchase items from the publisher, who pays tax on the income.
If you start using it to buy pizza it’s on the other side of the line. It’s an asset, and could be potentially taxable as an asset.
Spending it on a purchase is considered to be the same as selling it at a specific price. If you use bitcoin as a currency, then you have to report every transaction on your tax report, including the price that you acquired the bitcoin at, and its price at the time that you used it to purchase something.
I recal a thread on /r/personalfinance where someone bought Bitcoin, directly for another altcoin after the Bitcoin value went up, the end-of-year happened, then in January the altcoin value tanked. If both happened in the same year that person could use the loss of the altcoin to offset the gain of the bitcoin. But since they were in separate years, they had to come up with some huge amount of money to pay taxes on the gains from bitcoin (gains that were wiped out by the drop in value from the altcoin).
To do this properly, everytime you use bitcoin to buy something you should sell enough bitcoin (for cash) at the same time to generate enough cash to cover the tax on the main transaction (assuming bitcoin went up in value from when you acquired it).
We have to do that with securities too. You sell, you report. If my Bitcoin wallet was hosted with some financial company like Coinbase, I'd want/expect them to send me a 1099-B reporting those sales to help me with my taxes, just like Schwab sends me a 1099-B for stock transactions. But if not, just keep a record of the transaction in your own documents, showing the price of Bitcoin when the transaction happened, and that should be enough for the IRS.
That doesn't seem unreasonable. If I traded you a share of TSLA for a laptop, the IRS would treat it similarly, no? Bartering transactions are taxable.
Or ban the ability to exchange USD for Crypto and vice versa. Part of the argument for crypto is the exact reason why central governments don't want it to exist.
Outlawing bitcoin means legally preventing people from participating in the network by running full nodes, and it means legally barring exchanges from operating.
It's easy to scoff at the idea of censoring bitcoin, but I'd love to hear someone defend the censorship-resistance of bitcoin, because I really don't see it.
It's trivial to make it illegal to operate a full node, and it's not like the government doesn't have the dragnet surveillance infrastructure to enforce it. You can't transfer bitcoin without access to the network (ie: you can't physically transfer bitcoin between two untrusting parties) and if the government bars exchanges from operating legally, how do you actually trade bitcoin for anything?
> It's trivial to make it illegal to operate a full node
Right, making something illegal is trivial. But how would you effectively stop someone from doing it? You can tunnel the traffic as with anything. They'd have to go full China to stop it.
And you don't need to run a full node if you're willing to trust a consensus of miners about the current state. (You can see how much work a block (probably) took to mine, so if someone shows you a block with the wrong proof-of-work target you know they're lying, meaning that even this forgery to show to an offline user is 51%-attack level hard.)
> if the government bars exchanges from operating legally, how do you actually trade bitcoin for anything?
Have you ever travelled and bought currency privately? Either just because you ran out, or the listed exchange rate is fixed. You meet someone in a bar and hand them an envelope of cash.
If you used something like the OpenDime offline wallet then it would be easier. They'd transfer to the offline wallet which you would verify, and then you'd do a regular handover of physical items, cash for hardware wallet.
Sure, it's a bit shady, and maybe horribly illegal, but if you were trying to get out of the country with your family's wealth all of a sudden it'd seem pretty easy compared to the alternatives.
sure, if you think the US government is united against bitcoin and willing to step on the civil liberties afforded the ~30 million US citizens who own it.
but.... I really don't think either of those things is true. You should talk to people in the state dept or DoD and pay less attention to FED/Treasury. The current USD global reserve status quo isn't always great for the US gov.
Not allowing exchanges to exist as US companies or interface with US banking institutions would be two very obvious steps towards "outlawing" Bitcoin. I make no value judgements on whether this is a good thing, but want to point out that these steps would likely cripple Bitcoin.
They can seize the assets of all of the Bitcoin trading exchanges overnight. If they coordinate it across the globe so it affects all known exchanges then it will crush the value and lots of people will lose a lot of money. They would effectively shut it down.
>They can seize the assets of all of the Bitcoin trading exchanges overnight
The exchanges don't hold the assets. At least not of the guys that know what they're doing.
>If they coordinate it across the globe
In all 195 countries? Doubtful.
Even if by some miracle this could be pulled off, there are now decentralized exchanges.
Pretty much the only thing that would make any dent is getting visa & mastercard to shut down what they can...except they're both making moves in favour of Bitcoin currently
All legitimate Bitcoin trading exchanges have assets. Some countries have more flexibility to shut down companies than the US. During the golden era, governments weren’t sure what to do with Bitcoin so companies like mtgox were left alone but those days are gone. Especially with the threat of getting arrested for money laundering, it makes the risk much higher and popularity would plummet.
They could shut down Bitcoin trading in the Western countries and then put financial sanctions on any countries that allow Bitcoin trading. It would drive Bitcoin trading underground but with no legitimate and easy way of converting your Bitcoin to fiat currency, it would die quickly.
Once the price of Bitcoin drops below the price of the cost to mine it in terms of electricity, it would probably stop getting mined by many parts of the world. It also might drive Bitcoin into the hands of China but I think what would happen is that the governments would come up with some other form of cryptocurrency that they could control.
Seems more plausible that mixers and other techniques for evading surveillance would be outlawed, as I can't imagine a government giving up the blockchain data on peer-to-peer transactions. Imposing a KYC regs and social credit scores on wallets would be another likely measure. The U.S. will probably lead with a ban threat, and then walk it back to these measures as "reasonable," negotiated solutions. I'm not advocating these, but if I had to bet where the puck was going, this seems more likely.
For the record, I doubt the US will ban bitcoin. But let's imagine what would happen if it did. It wouldn't eliminate access to bitcoin but it would hurt its value quite badly.
The demand for heroin and cocaine is driven by intrinsic value: it gets you high. You can restrict supply but you can't stop people from wanting to get high. The demand will be there no matter what. The utility of the product is unchanged by laws or public perception.
Bitcoin doesn't have intrinsic value. It has value because people will buy it from you. I think BTC is a crappy technology, but I'm not ashamed to admit I'd buy one at $50,000/ea this instant, only because I know I can turn around and resell it for $57,000/ea. The only reason I want 1 BTC is that I know enough other people want 1 BTC badly enough, that I can sell it to them at a good price.
If exchanging my Bitcoin back into fiat or directly for goods becomes illegal, now I've got difficulty and risk involved in using it. I won't want Bitcoins as much. Its utility -- being useful for exchange -- can be directly impacted by the law.
A lot of the people who want to buy bitcoin today would not buy it if it were illegal to do so. I'm talking about casual retail speculators, Tesla, Microstrategy... all of your basic white collar investors who are looking to make a buck but don't want to get in trouble for it. If you delete all those people from the buying side of the order books, and put those who have already bought and want to get out on the selling side, what happens to the price?
I'm tired of this flippant statement that many crypto-detractors take as fact, that there's no intrinsic value in Bitcoin. When you create a product or service that other people want to use and pay you for, is there no intrinsic value there?
I don't know how else to say it. To me it is almost a tautology. In fact I would not even want a currency to have intrinsic value. I want my money to have value, but not intrinsic value. Maybe we have a mixup of definitions.
Let me see if I can explain my definition of intrinsic value.
Suppose a genie appeared before me and presented a gift to me, with one condition (enforced by genie magic): I can never sell this gift. The gift is a gorgeous, hand-engraved Krieghoff shotgun stocked in highly figured walnut. Now, this is a coveted object and one that would fetch a high price, if I were able to resell it. It's unfortunate that I can't! But I would still be thrilled to receive this gift. It's a very fine piece of craftsmanship and one that I can both appreciate for its beauty, and enjoy using on the skeet field. I want it just to have it and use it, not to sell it or put a number on it in measuring my assets.
You can imagine the same arrangement for many other things: a fancy car, a house, a stunning artwork, a barrel of booze, or even a pile of heroin and cocaine, if that's your preferred vice. Even with the stipulation that you absolutely cannot sell the item, you still want it.
Now, if the genie gave you a gift of Bitcoin, with this same magic arrangement that prevents you from selling it to somebody else (including trading it for anything), how excited would you be?
The point of a currency is to trade it. If you disallow that then you might as well ask about food that I'm not allowed to eat, art I can't look at, or a language I'm not allowed to speak.
> If you redefine "intrinsic value" to include "trade value", you have just made the word "intrinsic" meaningless. Is there any type of asset that does not have intrinsic value, using this new definition?
The value of cryptocurrency in the abstract over regular currency is that it's provably tied to a transaction which is a program, and that transactions cannot be reversed - any revocation mechanisms like escrow, timeouts, etc, need to be part of the contract and thus transparent. This has a ton of value if you want your software to be able to do things that involve real value, from topping-up your API limits on a website to trading Pounds against a falling Euro.
That can't be recreated by any centralized entity, such as the USA with dollars, or Ethereum and Eth, because of their ability to blacklist or roll back anything they don't approve of.
> The point of a currency is to trade it. If you disallow that then you might as well ask about food that I'm not allowed to eat, art I can't look at, or a language I'm not allowed to speak.
Yes! You get it. Currencies normally don't and shouldn't have intrinsic value. The gold coins of the distant past had some intrinsic value since they could be melted down and used for jewelry or corrosion resistant coatings etc, but all modern currencies have near-zero intrinsic value and there is nothing wrong with that.
I don't agree with your conclusion though, in that I don't think it's a meaningful statement.
All value is dependent on the use. Food is useful for sustenance, but less useful for shelter. Currency is worthless to eat, but useful to facilitate trade for shelter, etc. There's no objective intrinsic value to anything.
If the Genie was to offer two intangible things, useless in isolation, such as a cryptocurrency (not a unit of that currency, but the system itself) or a new human language, neither would interest me. Both only have network value. But if I was allowed to use them as intended I would feel happy to have either.
Do you agree that some things have value in isolation, in addition to their trade or network value?
If so, perhaps you can also agree that making that distinction might be useful, at least in certain situations.
In particular, the post that started this thread compared banning bitcoin to banning heroin. I believe heroin's value is driven almost entirely by its ability to get you high. The end users don't care if it's white, blue, red, or covered in Louis Vuitton logos as long as they are confident that it gets them high in that particularly lovely heroin way. When you ban it, you don't interfere at all with the fact that heroin gets you high. Heroin does that job as well as ever. By banning it, you make it harder to obtain, but you don't make having it any less desirable for the addict.
On the other hand, when you ban bitcoin, you do interfere with the thing that's useful about Bitcoin: trading it. Not only do you make it harder for somebody to obtain BTC, you make having BTC less desirable, because it's harder to redeem it for a product or another currency.
Maybe just speaking for myself here, but it wouldn't be as valuable to me if I couldn't go to a "legit" company like Coinbase to facilitate turning it into something I can use to buy a car or a house. I suspect a lot of people feel the same way so overall that lack of buying interest would be pretty strong downward pressure on the market price.
> Maybe just speaking for myself here, but it wouldn't be as valuable to me if I couldn't go to a "legit" company like Coinbase to facilitate turning it into something I can use to buy a car or a house.
Well, I've never used a centralized blockchain service. But then again, I've also transacted for foreign cash while in a bar. Obviously for you though, the value is based on those services. As it's a network effect, you not using it does hurt me a tiny bit multiplied by the number of people like you.
But it's not like it has to be the currency to be almost as useful. Euros aren't taken everywhere yet nobody trades them at a discount in those areas. As long as cryptocurrency works for what I want it to, I don't much care that it's a bit harder to use at the grocery store.
And of course, what's the consequence of the law? Do they shoot you, or do they just treat it as foreign cash or something and tax you at the least favorable rate? A totally ineffective ban could actually help. If you drove it underground enough that nobody declared it (or paid taxes on it) the increased value might help a burgeoning underground economy and help create money-laundering opportunities. And the ban has to be relevant to the use. If the USA banned bitcoin it might actually help other countries more than the diminished value of bitcoin hurt them and that disproportionate benefit could be the catalyst to make the system more useful overall.
Already the USA has effectively banned most cryptocurrency by limiting what Americans can invest in and who they can invest through, but because of the halo effect Americans can buy BTC and ride the general wave despite not participating in some of the other opportunities directly. The limited ban did almost nothing despite your logic being fairly sound.
Very excited! because by definition, it wouldn’t be bitcoin if it couldn’t be transferred. A genie cannot give you a bitcoin that cannot be transferred; as a bitcoin is only the ability to transfer. This censorship resistant value transfer channel has an intrinsic value — let’s say the genie anti-selling analogy applied to fiat gateways; no problem, I’ll swap my BTC for Starbucks gift cards and spend it all on the coffee that I am supposed to not be able to buy. Replace gift card with anything else you might want.
You know, if you want to just ignore the premise, you could also point out that genies aren't real, magic doesn't work, and heck, even for the physical objects there's no way I could be prevented from reselling my brand new shotgun or car or pile of drugs! But in doing so, you might miss the point of a thought experiment like this.
There is a difference between things that are desirable in and of themselves, and things that are desirable because of their trade value. The term "intrinsic value" is used to make that distinction. It doesn't mean things without intrinsic value are bad, or broken, or doomed to fail. It's not a strictly negative or positive distinction. But it is a useful distinction to be able to make.
If you redefine "intrinsic value" to include "trade value", you have just made the word "intrinsic" meaningless. Is there any type of asset that does not have intrinsic value, using this new definition?
Now, getting out of the realm of hypothetical genies and magic, you can make an argument that government regulation cannot realistically prevent trade in Bitcoin, so that trade value will be maintained. No intrinsic value is required. I'm not so sure that the trade value would hold up without the buying pressure from retail investors and businesses wishing to comply with US law, but reasonable people can disagree.
I love the hypothetical, but I will admit I tried to redirect it :-) thank you for your response.
I agree, one cannot consider “trade value” as a component of intrinsic — I think a better (partial) attribute of intrinsic to be its fungibility, which is more what I meant (ease of selling) instead of “trade value” as (sale price). Ease of selling can impact the sale price, which makes it an attribute of its trade value, not intrinsic, but I am making an argument that the very nature of the asset’s fungibility makes it a component of its intrinsic value. BTC is not perfectly fungible due to tx taint, but it is fungible enough over traditional stores of value that it makes it slightly better than traditional. This itself is independent of its sale price; “BTC had an intrinsic value the day it was born”, by merit of its coin provenance, audibility, integrity, censorship resistance and fungibility. That is worth something, even if nobody on earth wants to trade it for fiat.
When some people think that governments can't really ban bitcoin because the bitcoin nodes can always exist "underground" and keep mining over VPNs, and the government has no mindreading technology to know which citizens have memorized a 12-word passkey to their wallet, and so on... that's a naive view of the coercion tools the government has at its disposal.
To lower bitcoin's advantages as an inflation hedge, governments can:
- tax heavily the conversions of bitcoin into fiat cash and vice-versa back into bitcoin. E.g. an "oppressive 90% tax" at the exchanges like Coinbase
- declare exchange businesses as illegal. This is analogous outlawing nationwide gambling websites. Yes, the bitcoin network by design still operates without exchanges but the barriers to quick liquidity and fears of cashing out affects its value as inflation protection
- declare property transactions enabled by bitcoin to be null & void. E.g. If you convert 4 bitcoins @ $50k to buy a $200k house, that real estate transaction is illegal and the government uses its power to confiscate the property. Analogous to property seizures because of drug money. The government still wants to trace the origins of money and if it's an illegal activity, the property is forfeited.
- require citizens to declare the bitcoins they own. This is based on the honor system and citizens can try to hide it of course -- but the FBI and IRS can monitor large amounts of fiat cash deposits into bank accounts and if the citizen can't explain where $200k legitimately came from, ("Uh, I sold a car wash business!"), they get fined or go to jail. Of course, the black market will come up with solutions to "legitimize bitcoin cashouts" but again, the barrier to lawful liquidity decreases its inflation hedging value.
- require a government license to use bitcoin. E.g. After your license is approved, you must run extra software to notify to the government the bitcoin addresses and amounts you intend to transact. Yes, the bitcoin network is independent from the government but that doesn't matter because if your self-reported declarations don't match the bitcoin activity, your property can be seized. Analogous to informing the SEC ahead of time of a new issuance of corporate stock.
- ... any creative other ways? The common theme is that citizens still have to interact with the real world and the government has a monopoly on enforcing property rights and putting people in jail in that real world. There doesn't have to be a law that literally has the word "ban" in it. Instead, governments can changes bitcoin's utility and thus its market value.
So to balance all the negativity above, the way bitcoin can avoid government interference is to virally embed itself so thoroughly in society that it makes it politically impossible for the government to pass anti-bitcoin laws. Examples:
+ many influential members congress have significant net worth tied up in bitcoin so they are unwilling to pass laws that hurt themselves. Self-interest and self-preservation can be used against the government.
+ several large institutions (e.g. California Federal pensions, cancer charity endowments, etc) that millions depend on have significant bitcoin holdings.
+ the more influential billionaires that hold bitcoin, the more they pressure congressmembers into leaving bitcoin alone
It's hard to predict how game theory between government and citizens will play out. It seems like it's easier for China & Russia to control its citizens bitcoin rather than the USA.
> + several large institutions (e.g. California Federal pensions, cancer charity endowments, etc) that millions depend on have significant bitcoin holdings.
This is actually a key observation, and I hope that some crypto whales can see that it may be in their best interest to donate large amounts of crypto to some high-profile charities (or possibly University endowments?)
Not only would they get income tax deduction for charitable giving, if they donate the crypto directly (rather than converting it), they pay no capital gains on a conversion.
Plus, importantly, the philanthropic beneficiary -- ideally high profile -- is now invested in ensuring the survival of said alternative financial system.
To make it effective you'd need to prevent the charity from cashing out. Perhaps make a dividend-paying instrument by continually re-loaning the base currency and taking the interest payment and converting them into a stablecoin which gets paid to the charity, but with no way to redirect the payments or convert it into a lump sum.
The US government effectively destroyed the US internet poker industry a decade ago without banning internet poker itself by simply banning banks from transferring money to/from poker sites.
> + several large institutions (e.g. California Federal pensions, cancer charity endowments, etc) that millions depend on have significant bitcoin holdings.
That's horrifying.
That sounds like a strategy a sentient AI would use in a cyberpunk novel to deter the humans from acting against it before it's too late.
(not to say that you're wrong or that it wouldn't be effective; just... jeeze, I hope it doesn't get that far)
Good... bitcon is just a massive ponzi/M&L scheme, being held by few whales with the rest holding crumbs and just hoping for the moon... My biggest issue with it is that is extremely inefficient and just pollutes needlessly.
Has anyone tried to buy something with it lately? I tried in 2016, and it was almost impossible unless you go through 3rd party exchange, and the rates were insane.
If you read it, mine was a question. If you have any special knowledge, Enlighten us please.... If you have to use centralized third parties to use it efficiently, then it defeats its purpose.
my single bitcoin remained there, because I couldn't use it in an easy manner. I am kind of glad about it, as it has risen in value, but really, apart 'it rises in value', what practical use does it have?
Feels like modern day tulip mania.
Is this really likely? We're seeing Bitcoin embraced by financial institutions, payment processors like Visa, pension funds, etc. It seems to me that the wind is not blowing in the direction of a Bitcoin ban (or "ban").
Kinda wish it would a little... I love the concept of crypto, esp. possible uses for fighting income inequality and creating UBI.... but Bitcoin is a power hog, I'd love to see it die--but still keep Ethereum, Cardano and newer tech, unless BTC can figure out a switch to proof of stake or something a bit less energy required, or move miners to the moon.
Can we ban proof-of-work cryptos at least? I know you can't exactly ban BTC itself but you can ban the new PoW ones for environmental reasons and mining BTC isn't profitable for...anyone but the NASA supercomputer, right?
Frankly I’m surprised they haven’t done this already. There’s no way to account for money laundering which is an obvious use of Bitcoin. There are services that outright specialize in this.
My expectation is that they are coordinating with other countries so that they shut down bitcoin immediately across large swathes of the world. That would be enough to damage it permanently. They did something similar with online poker in the US and I can’t believe they wouldn’t do the exact same thing in this situation.
That's not why Dalio says Bitcoin could be outlawed. His justification is based on gold being outlawed in 1934. It was about monetary policy, not legal matters.
Yes I know. But the USD was backed by gold then. Today it’s not. Janet Yellen has made several talks about the dangers and risks of Bitcoin in the last several months. I think the US government is definitely setting its sights on Bitcoin.
Imo Bitcoin will eventually be outlawed because it will be competition to the banks' coins. When banks make a crypto coin that is ready for public consumption then they will come down hard on Bitcoin.
Except bitcoin isn't actually used as a currency, it's only really used as an asset. As such it's not in competition with anything functionally, because it has no significant functional utility outside it's asset value.
Private ownership of (large quantitities of) gold was actually illegal for a few decades in the US. This is separate from transitioning to fiat currency.
Hence the plot of Goldfinger which otherwise, and without an appreciation of the psychological importance of the gold standard, doesn't make a lot of sense to a modern audience. The premise seemed quaint even to me as a teenager in the 80s.
Ah, I knew about that, but it totally slipped my mind. Regardless, there were loopholes, like jewelry. Maybe a bitcoin ban would just mean art like NFTs become suddenly popular.
The loophole gold did lose quite a bit of it's value as a result though, looking at a CPI adjusted price chart gold went from a high of $692 an ounce in 1934 to a low of $246 in 1970 culminating in the end of the gold standard, and then to $2200 by 1980 following repeals.
Another chicken little claiming the Big Bad Fed is going to pressure Congress into outlawing bitcoin. The most open economy in the world is going to outlaw bitcoin? To what end? What are they going to outlaw next? Outlaw gold? Silver? Platinum?
Everyone calls bitcoin a currency. I don't think of it that way. I think of it as digital gold and should be treated the same way as you'd treat gold from an investment standpoint. The fact that Tesla takes bitcoin as payment is simply a novelty of our time.
Highly doubtful. Code is free speech, and the ability to run whatever software one wishes is the expression of that free speech.
Where they do have the power is regulations regarding (legacy) financial industry. Given the interest in magic internet money from institutional investors and wall street, I think the moment where it would be acceptable to block fiat->cryptocurrency transactions has passed, and would now offer a systemic problem for big finance today.
> Highly doubtful. Code is free speech, and the ability to run whatever software one wishes is the expression of that free speech.
Yeah, that's not how the law works. There are regulations about what software you can run with software-defined radios, since the FCC regulates radio emissions and SDR allows you to potentially violate those regulations. Free speech is not going to be a defense here that will win you victory in the courts.
https://news.ycombinator.com/item?id=26625859 (68 points/119 comments)
https://news.ycombinator.com/item?id=26618206 (34 points/79 comments)