Making Bitcoin illegal is a popular subject of modern discussions. Bitcoin has been on the periphery of financial markets for almost a decade. It was gradually regaining the status of an alternate asset class. Can the government of any major country intervene and do the unthinkable – ban Bitcoin?
Those who are in denial that government can make Bitcoin illegal should remember history. Consider the possibility of implementing such a scenario with the example of several states.
Prohibition against owning gold in the US
Let’s remember the time when the possession of gold bars was considered a crime in the US. You would pay with your freedom for 10 years. In 1933, US President Franklin D. Roosevelt issued executive order #2102. The decree ordered Americans to transfer their savings in gold to the Federal Reserve Bank. The ban on possession of gold has been in effect for over 40 years. Only then President Ford legalized gold assets. This became possible due to the US refusal of the gold standard. The need for physical possession of a large amount of precious metal to maintain the national currency expired.
Big Chinese Firewall
In the era of globalization of the Internet economy, some governments of the countries do not have the power and will to effectively combat decentralized cryptocurrency. However, the Chinese authorities are still trying to control the Internet. The state government is trying to restrict citizens and suppress political dissent through the means of monitoring Internet traffic. Thus, the prohibition of Bitcoin will not become a rather unexpected step from the Chinese government.
India and demonization — making Bitcoin illegal
The view that the money, printed by the government and affirmed by the central bank can’t be banned, is also mistaken. Recall that in November 2016, the Indian government issued a decree to withdraw in banknotes of 500 and 1,000 rupees from circulation. Thus, their use became illegal immediately. The citizens of India had to stay in huge queues in banks to exchange the old currency. Getting a new currency was not easy because even longer queues appeared at ATMs. This demonetization was advertised as a means against evasion from paying income tax and a measure to solve most of the government’s financial problems. Almost a year later it became obvious that demonetization failed. It did not solve the tasks set by the government. However, the demand for Bitcoin increased.
Is the prohibition of Bitcoin achievable?
If any government decides that the trade or possession of the cryptocurrency is illegal, then the question immediately arises: how can this the of Bitcoin be implemented? After all, the government cannot confiscate the Bitcoins from the owners. They have to give the private keys themselves.
However, most citizens and organizations will prefer to stay on the legal side. Most likely, the majority won’t violate the law. Thus, demand for Bitcoin will fall when the government decides to ban it. Will it affect prices? Exchange offices and exchanges in such a country will cease to function. Also, the purchase/sale of Bitcoin will turn into a difficult and risky operation. It can strangle Bitcoin in this country. All-in-all, the government will partially achieve its goals regarding making Bitcoin illegal.