Bitcoin is a decentralized and unregulated form of currency, which means that it is not controlled by any government.
This can be both its biggest weakness and its greatest strength. To date, no country has ever been able to completely ban Bitcoin from being used within their borders. However, there are many countries who have come close to doing so, with varying degrees of success.
Table of Contents
- 1 Why ban Bitcoin and cryptocurrency?
- 2 Is a Bitcoin ban even possible?
- 3 Governments that are embracing Bitcoin
- 4 Taking control with CBDCs
- 5 Will anyone ever ban Bitcoin?
Why ban Bitcoin and cryptocurrency?
1. Money laundering & other criminal activities
The growing popularity of cryptocurrencies has not gone unnoticed by criminals who use these new forms of currency for their own nefarious purposes.
Particularly, money laundering or fraud schemes which steal from unsuspecting individuals looking to make some fast cash off of investments they don’t fully understand.
Cryptocurrency scams have been on the rise and are only expected to grow. In 2020, there was a 40% increase in crypto scamming, mostly utilising Bitcoin, while this years it’s predicted this number will nearly double.
With so many possible ways to commit crime through digital currencies, governments ought to be working harder at coming up with innovative regulation policies rather than resorting to ban Bitcoin .
Most attempts to ban Bitcoin and other cryptocurrencies just drive business underground into channels where law enforcement can’t keep track.
2. Threats to banks and fiat currency
Another major reason to ban cryptocurrencies is the threat it poses to government-directed monetary policy.
The more control citizens have over their holdings, the more power they have over existing governmental agencies.
Unlike stocks where there are more checks and balances between shareholders and directors, with crypto only one individual is accountable – directly undermining economic stability when things go south.
3. Risk to citizens losing their money
Binance, a world leader in cryptocurrency exchanges was recently banned from operating regulated activities (things like futures contracts, rather than normal cryptocurrency trading) within the United Kingdom.
The UK decision comes as an example for other countries that are considering regulating cryptocurrencies or in some cases to ban Bitcoin. Aside from worries over fraud and money laundering, there was growing concern about investors, both small and large, losing their money in the currently volatile cryptocurrency markets.
The Financial Conduct Authority (FCA) said that it had ordered Binance Markets Ltd to stop carrying out any regulated activity, including trading with UK clients without their express permission. After some confusion, it was made clear that Binance is still available to UK users who want to buy and sell cryptocurrencies in the normal way, but they can no longer engage with things like Bitcoin futures.
Is a Bitcoin ban even possible?
Nigeria’s government is uneasy about Bitcoin, but the same can’t be said for its citizens. Nigeria’s national currency, the Naira, has lost nearly all of its value in recent years as a result of global financial instability.
Corruption-induced economic policies imposed by Nigeria’s politicians that have left millions unemployed with no way to make money or buy food. It was only natural then when they looked to cryptocurrency during this time period.
Soon, however, banking institutions were banned by Nigerian law from facilitating crypto transactions due solely out of fear (rightfully so) that more devaluation would occur which will inevitably lead into an even worse situation than what they’re already facing.
It’s become imperative for Nigerian crypto-enthusiasts to cloak their cryptocurrency purchases as best they can by sneaking them in between other transactions, but if there’s any indication that Bitcoin was used for payment then the bank account gets frozen immediately without warning. If Nigeria really want to ban Bitcoin, they’ll have to work a lot harder to enforce it!
In addition to Nigeria, countries like China, Turkey, Egypt, and India have recently floated proposals to ban Bitcoin and crytocurrencies as a whole. Even the more forward-thinking, technology-conscious Western economies have grown more hostile towards cryptocurrency.
European Central Bank chief Christine Lagarde is not a fan of Bitcoin, and has been vocal with her disapproval. She slammed cryptocurrency as an “highly speculative asset” that was often used to fund illicit activities. Her comments were echoed by US Treasury Secretary Janet Yellen, who said in testimony that cryptocurrency transactions are “mainly for illicit financing.”
As the crypto craze continues to grow, some fear central banks will be rendered powerless by this disruptive new technology, and so push to ban Bitcoin and other cryptocurrencies at any chance they get.
Cryptocurrencies present a clear and present danger to authority over money supply in respective jurisdictions. The authority of central banks in different regions is at stake if they cannot control this new form of money, which has many people worried about what the future of Bitcoin will look like.
Governments that are embracing Bitcoin
With that being said, the underlying blockchain technology may be used by more forward-thinking governments sooner than you think. While countries like Nigeria have instituted a Bitcoin ban, other countries like Venezuela and El Salvador are embracing cryptocurrency as an asset class.
In 2018, Venezuela launched the Petro cryptocurrency on their NEM blockchain to improve liquidity and stabilize the national economy. The token will use oil reserves in order to create an alternative for Venezuelan citizens that are crippled by hyperinflation of their current fiat currencies.
Petro is now the only accepted payment method for government document services and airplane fuel for planes flying international flights.
Rather than ban Bitcoin, El Salvador‘s President Nayib Bukele recently announced that the nation was going to be the first in the world to make Bitcoin a legal currency.
In Central America, most people are not in the banking system; 70% of El Salvador’s population is unbanked. This leaves them with few options for funding their economic activities and restricting access to micro-financing organizations that could help increase personal wealth-building opportunities.
El Salvador, like many other countries in the world, worries about how much control it has over its own economic future. The country’s economy dollarized 20 years ago and they’re scared of what would happen if their currencies are too linked to another nation like the United States. El Salvador is very aware that inflation can be caused by any number of factors.
And when an entire region’s economies rely on one currency, there will always be a fear for everyone involved.
The British Virgin Islands is another such country that’s looking into these technologies themselves; recently proposing a long-term strategy on digitizing their economy via a central cryptocurrency that is backed 1:1 by USD.
Taking control with CBDCs
In the eyes of some, cryptocurrencies such as Bitcoin are a boon to society: they provide transparency and security without being controlled by any central authority.
However, supporters of Central Bank Digital Currencies, or CBDC, argue that governments would be able to monitor financial information more easily with this system than if citizens were using an anonymous currency like Bitcoins.
This could lead officials into blacklisting transactions for various reasons in order to protect their interests; it is unknown what kind of power these authorities might have over your digital assets should you choose not comply with certain “rules.”
Countries like China are testing CBDC platforms with the digital yuan, as a way to control the digital version of their currency. So what’s next for cryptocurrencies?
Will anyone ever ban Bitcoin?
The aim of Bitcoin was to use cryptography to control and regulate its generation and distribution among users around the world without relying on any single central authority.
The fact that it is not controlled by any government or bank makes it quite attractive for those who are looking to avoid censorship or other governmental interference with their finances.
Since then, these virtual coins have grown tremendously in value and popularity, emerging as a viable alternative for many people who want more freedom over their money’s value than what traditional currencies offer them.
The digitization of our world has allowed for a more seamless, global economy to take hold. Blockchain technology is at the forefront of this transformation with its ability to empower third-world and developing economies by providing them access digital banking without having adequate infrastructure in place.
This would be able to help areas that are currently dominated by fiat currency but lack an appropriate payment system due either because they do not have enough banks, or don’t even have any bank services available where their citizens live.
In a global economy, blockchain can help third-world countries transition to digital in pace with developed and first-world counterparts.
This is especially impactful for areas currently dominated by fiat that are hindered by an inadequate or nonexistent banking infrastructure which would be beneficial for them as they will no longer have any difficulty participating in the modern society of today.
The question is, will the countries that need this flexibility the most, continue to try and ban Bitcoin for their own benefits? Only time will tell.