There is a lot of talk about governments all over the world moving to ban cryptocurrencies. The claim is usually that these anonymous currencies aid in money laundering and the purchase of illegal items like weapons and drugs as well as for other illicit activities like terrorism and human trafficking. The truth of the matter is that the government is more worried about not having control over the money supply. In a world where cryptos are the dominant mode of transaction, people in power can no longer print money out of thin air to enrich themselves and their friends. All the illegal items mentioned above can very easily be paid for with fiat currency as well – just as it has been for so many years in the past.
We thought it would be good to discuss how exactly a government would go about pulling down a cryptocurrencies and what the repercussions would be.
The short answer is, no, governments cannot technically ban a cryptocurrency because the protocols on which they are based are decentralized - with miners all over the world verifying transactions and adding blocks to the blockchain.
Even if a particular county’s government banned mining the system would still be completely unaffected. This is not to say that if a government really wanted, they couldn’t make life difficult for crypto users and slow down the rate of crypto adoption in their country - The government could attack the development teams of these cryptos, block transactions from exchanges, issue statements making trading/owning cryptos illegal as well as penalize businesses that accept crypto. They could also confuse people by issuing their own digital currencies and spread false information about cryptos through reputed investors in the business world. This could potentially keep people from understanding how this technology works and make it hard for them to access it.
Luckily, peer to peer payments using crypto currencies like BCH are permissionless and only need the two parties involved to agree on the terms of the deal. No government, bank or other institution can block such a transaction from taking place. This is the beauty of cryptocurrencies and this is why people love them so much. If a large enough percentage of the population owned cryptos then the government would have no way to prevent people from exchanging it between each other. They surely would not have enough space in their jails to lock up 10 million people (that’s only 0.7% of India’s population!)
This is why decentralization is so integral to the success of any cryptocurrency. There is no doubt that governments will try to hold on to control by any means necessary. They need people to quietly abide by their laws and pay their taxes on time. With cryptos, it’s harder to coerce people into doing something that they don’t want to do – like paying for a corrupt and inefficient police system.
Once way a government could control a particular cryptocurrency is to fill up more than 51% of the mining share. In this way, they could theoretically mine empty blocks and ban all transactions. This is why the ‘proof of work’ aspect of cryptocurrencies is so integral. It would take a ridiculous amount of hardware, energy, and time to organize an operation that would mine more than 51% of all new blocks coming into existence. The current system is decentralized - with miners all over the world working together to secure this new global currency. It would be very hard for a single entity to mount a larger operation than the one that currently exists simply for the purpose of sabotaging it.
We will undoubtedly see a lot of scare tactics in the coming months and years – which administrations around the world getting more and more worried that their scam will be exposed. Let’s work towards a future where we can store the fruits of our effort in a reliable way, move away from fraudulent systems and make sure that we are not the ones funding our own oppression!
Possible Outcomes
· Would make people more curious
Government intervention could inadvertently further emphasize the role that cryptos play in a free society. This would make more people curious, and adoption would grow.
· Rise in Protest
People could rise in protest. In 2011, the Egyptian Government ordered internet service providers to turn off the country’s internet. This caused widespread outrage and ended with that government being overthrown.
· Exodus of companies and HNIs
Wealthy people and companies tend to leave countries where high taxes are levied on their earnings. A government crackdown on cryptocurrencies could see a lot of economic activity leaving their shores.
· Exodus of smart people
Some of the smartest and most influential people in the world value freedom over anything else. A ban on cryptos is basically a ban on freedom. The will also force many of a country’s greatest assets to leave.
