Can a country really ban Bitcoin?

It sounds funny, but can it ever happen?

Concerns that a country might impose a total ban on Bitcoin have lasted for more than a decade, but as time goes by, this possibility is getting smaller and smaller.

Since the birth of Bitcoin, people have been worried that it is only a matter of time before this cryptocurrency is banned by governments around the world. First of all, Bitcoin is often regarded as a threat to the traditional monetary system, possibly undermining the central bank's control of the money supply. There are also concerns that due to the pseudo-anonymous nature of Bitcoin, it facilitates drug trafficking, money laundering and ransomware.

However, whether it is really possible for the government to ban Bitcoin will vary in different regions. The question of whether Bitcoin can be banned has been answered to a certain extent, because this cryptocurrency has been officially banned in several countries.

At present, only a few countries have completely banned Bitcoin, prohibiting any form of interaction with cryptocurrency, possession or use of Bitcoin. These countries include Algeria, Ecuador, Egypt, Nepal and Pakistan. Several other countries, including Saudi Arabia and Taiwan, have also introduced partial bans on cryptocurrencies, usually to prevent financial institutions from conducting cryptocurrency transactions or to promote bitcoin transactions.

China's Bitcoin ban

Of all the countries that have adopted a negative stance on Bitcoin, China has taken some of the most aggressive actions against cryptocurrencies in 2021. Stimulated by its commitment to carbon neutrality (and experts point out that the process is mainly due to the upcoming launch of the digital renminbi), China has already cracked down on cryptocurrency mining and cryptocurrency-related companies. China has long banned cryptocurrency transactions, but in 2021, China forced cryptocurrency miners to close their operations and move out of the country. At the same time, the People's Bank of China issued a decree to payment platforms and banks ordering them to stop cryptocurrency activities.

Before cracking down on the mining industry, China controlled about two-thirds of the global Bitcoin mining industry's computing power. What followed was a massive outflow of miners, and cryptocurrency exchanges Huobi and OKEx restricted services to mainland customers. Even personal accounts related to cryptocurrencies have been blocked by the popular social media site Weibo.

At present, Bitcoin's entire network computing power has steadily recovered from the initial downturn after China's ban on mining. Although the price of Bitcoin has not recovered to the height before the ban in April and May 2021, the price of Bitcoin has started to rise steadily since late July.

Will the United States ban Bitcoin?

Currently, Bitcoin is legal in the United States. The US Securities and Exchange Commission (SEC) has stated that it is not a security, while the Commodity Futures and Trading Commission (CFTC) announced in 2015 that it is a commodity, just like gold, and therefore subject to its supervision. In addition, in 2013, the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of the Treasury issued guidelines stating that it is legal to invest in Bitcoin and use Bitcoin as a payment method, as long as sellers of goods or services are willing to accept it.

Due to the intricacies of state and federal laws in the United States, the specific regulations on Bitcoin vary from state to state; for example, in Hawaii, Bitcoin and cryptocurrency-related businesses need to apply for a currency transmitter license, while Wyoming grants digital currency The same legal status as currency.

In 2021, people's familiarity with Bitcoin has reached a record high, but trust is still an issue, and many uncertainties still surround the legal status of the world's most popular cryptocurrency. In many jurisdictions, Bitcoin is considered the most popular currency.

However, there are still some risks, and Bitcoin has been criticized by regulators and some lawmakers. Gary Gensler, chairman of the US Securities and Exchange Commission, has made it clear that Bitcoin is a speculative asset, and that cryptocurrency facilitates crime and does not meet the requirements of currency. Senator Elizabeth Warren expressed concern that cryptocurrency will allow the financial system to "be at the discretion of a group of obscure, faceless super coders and miners."

Although there is no evidence that the United States is considering a complete ban on this flagship cryptocurrency, it is theoretically possible to impose strict regulatory requirements on the entry and export of the Bitcoin ecosystem, making it difficult to obtain and use this cryptocurrency, informally. Ban it. However, doing so may have serious economic costs.

"Bitcoin is deeply entrenched in the American financial system and cannot be banned."- Marshall Hayner

"Bitcoin is deeply entrenched in the American financial system and cannot be banned, culturally or technically," MetalPay CEO Marshall Hayner said in an interview with Decrypt. "This will mean shutting down the supervision of billions of dollars in assets. Institutions, reducing tens of thousands of jobs, sending innovations overseas, and contributing to the black market of Bitcoin."

Banning Bitcoin is an impossible task

Although it is obvious that the government is likely to issue a ban on Bitcoin, in many countries it will be difficult or even impossible to actually enforce such a ban. Unless the government strictly controls the Internet, individuals will almost certainly be able to download Bitcoin wallet software, run a node, and complete transactions.

In most countries that have banned Bitcoin, there are still a large number of Bitcoin users, which is proof. According to a 2019 report by We Are Social, about 4% of Internet users in Egypt currently own cryptocurrency, and the cryptocurrency market tracking platform CoinMarketCap ranks Pakistan as one of its fastest growing user groups in the first quarter of 2020.

Similarly, even in countries with strict Internet controls, the various tools used to bypass these restrictions can make the effort pointless. After all, when almost anyone can access the Bitcoin blockchain via Blockstream satellites using relatively inexpensive software-defined radio (SDR) dongles and antennas, imposing a ban on Bitcoin becomes an impossible task.

Hayner also mentioned, “The United States can impose stricter restrictions on the purchase and sale of BTC, but a complete ban is impossible to enforce.”

Another question is whether the introduction of a ban on Bitcoin will stimulate people to buy more Bitcoin. This is an argument put forward by economist Saifedean Ammous, the author of the "Bitcoin Standard". His reasoning is that the government's ban on Bitcoin will show that the government is seeking to restrict people's financial freedom and will help strengthen the influence of cryptocurrency. "If your bank tells you,'You can't use your bank account to buy Bitcoin.' This is actually just an advertisement for Bitcoin."

He believes that, on the contrary, the government can try to destroy the demand for Bitcoin by reducing the economic incentive to use Bitcoin and creating better alternatives.

However, as Bitcoin became a legal currency in El Salvador, Ukraine also sent a research team to El Salvador. It seemed that they wanted to study the precedent of El Salvador to pave the way for their country’s future Bitcoin policy. Bitcoin seems to be accepted by more and more governments, and as each new country adopts Bitcoin, the likelihood of other countries imposing bans on it will continue to decline exponentially.

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