Bitcoin is often seen as an alternative to the current money system. Bitcoin provides its users with the possibility to transfer money without the interference of banks, governments or other parties involved in the process. Because of less interference between parties, some see the use of Bitcoin as an alternative to the current money system. A question arising from this situation is: are governments going to interfere with the usage of Bitcoin and therefore are they seeking to regulate or ban the transfers made with Bitcoin?
China
A great example of government interference is China. In China, all cryptocurrencies are banned already. China’s central bank announced earlier this year that all transactions by cryptocurrencies are illegal, making Bitcoin usage unable. Since China is one of the largest markets in the world, its impact on the cryptocurrency market is huge. The central bank stated that the use of cryptocurrencies is seriously endangering the safety of people’s assets. Moreover, they mentioned the fluctuations of Bitcoin often impact the global price of cryptocurrencies.
United States
Whereas China decided to ban all cryptocurrencies, the United States’ Security and Exchange Commission (SEC) announced they are not going to ban cryptocurrency. This was said on October 5th 2021, following up the statement China made earlier. SEC’s chairman Gensler mentioned in a press conference that the US’s focus is on ensuring investor and consumer protection rules, whilst fighting money laundering. It could be stated that the approach of the US is definitely different compared to China.
It is hard to stop Bitcoin as of today since many people are in some way invested in the coin. Completely banning the coin, or even all cryptocurrencies, might not be the best option and could lead to some form of criminal use. Governments might have to control all data traffic to fight against malicious use of the currency, but totally regulating it is harder than they might think.
BBC (2021).China declares all crypto-currency transactions illegal. BBC.
Bain, B (2021). SEC chief signals crypto ban like China won’t happen in the US. Bloomberg.
Hi Freek. Thanks for this blog. It’s a super interesting and relevant topic nowadays that definitely needs attention. It’s definitely hard to regulate cryptocurrencies in an attempt to fight financial crime and not banning it. As adoption is still increasing, do you think there are other ways for governments to assist adoption while also ensuring security?
Hi Freek,
Interesting post, although I do not completely agree that banning Bitcoin is impossible. During Hyperinflation in the 1930s, the US banned people to hold any form of gold because it would enlarge the already huge wealth gap back then. Also, It would have devalued the dollar even more. This is also why governments hold a huge amount of gold as a reserve, may the currency fail. So why would governments of the western world with already enough gold reserves, accept bitcoin as the main currency, which would then devalue all the gold holdings they have.
Coming back to the wealth gap, looking at the bitcoin distribution (see link below), I can only an even more unfair system if Bitcoin became the main currency. You can see that 0.04% of all addresses hold 65% of all bitcoin in existence. I don’t know exactly how many people hold 65% of all assets nowadays but this wouldn’t come close to 0.04%. So, if bitcoin would come to a mainstream currency, the people would certainly not be empowered, as the crypto community sometimes claim.
https://bitinfocharts.com/top-100-richest-bitcoin-addresses.html