Can Governments Forbid and Destroy Cryptocurrencies?

The topic of the cryptocurrency ban by the governments has been exaggerated for a long time in the information space, however, despite all skeptical forecasts, the cryptocurrencies have only continued to grow.

Is the ban on cryptocurrencies real?

The nature of cryptocurrencies is such that their complete prohibition is impossible by default.

The main reasons for this are two:

  • Cryptocurrencies are non-material
  • Cryptocurrencies are decentralized

Paper money can be withdrawn from circulation, it is possible to stop the emission process, or prohibit equipment that issues money.

Cryptocurrency cannot be withdrawn from circulation by violent means. It is impossible to stop their issue/mining because it is necessary to take computers from all people.

Centralized currencies can be destroyed by influencing the bodies that provide centralization. Decentralized currencies are not amenable to destruction, change, and control in this regard because it is impossible to influence all the holders of cryptocurrencies at once.

The only option to limit the currency is to forbid their use by special laws. In practice, however, it turns out that banning cryptocurrencies even in one country is a non-trivial task.

How can the ban of cryptocurrencies be implemented in practice?

Necessary laws may appear that forbid activities of any organization that relates to the cryptocurrencies. These are online exchanges, wallet apps, asic shops, ICOs, etc. Citizens who continue to provide services or use them become violators of the law. They can be fined or imprisoned. The same applies to individuals who, for example, sell something for Bitcoins.

There can be issued orders to ban local and foreign websites related to cryptocurrencies. Access to them may be blocked at the level of Internet service providers. ISPs cannot fail to comply with the order, otherwise, ISPs become violators too.

Theoretically, people can be punished for publishing information on their pages in social networks, blogs, etc.

How realistic is the ban on cryptocurrencies by governments?

The problem is that it is practically impossible to implement the legislative ban completely in the modern world. Cryptocurrencies and blockchain are technologies that, with the due desire of the user, may ensure high anonymity. Law enforcement bodies have practically no opportunity to find people who have made even minimal efforts to ensure their anonymity. And these efforts are very insignificant even for an average user who has minimal technical skills.

Obviously, if governments start mass prohibiting crypto-money, the number of currencies that allow bypassing these prohibitions will increase dramatically. Theoretically, blockchain allows implementing almost any cryptographic algorithm.

Actually, there are some cryptocurrencies already now that allow avoiding any tracking. These are Monero, Verge, etc. It takes hard and long work of high-class specialists to identify people who use these anonymous cryptocurrencies. And police officials fail in many cases. This leads to a second problem - the problem of human resources. There are too many people who use cryptocurrencies. It is impossible to track down all of them. Law enforcement authorities in most countries will be able to cope only with the biggest offenders, leaving the small (majority) alone. This majority will safely use cryptocurrencies, as a result, it will be impossible to talk about a complete ban.

Is it possible to simply ban websites that have to do with cryptocurrencies?

If you prohibit the activity of cryptocurrency related Internet resources registered in one country, this website will simply change the location and transfer its servers to another country.

You can block access to foreign websites. But such measures rarely stop people. They use Tor or VPN even when it comes to the entertainment content. Definitely, it will not stop those who use cryptocurrencies to make a living.

In addition, any restrictions will lower the rating of the current government and, if too stringent measures are taken against violators, can lead to political and social unrest. No government is interested in such scenarios.

Is it really necessary to forbid crypto?

More and more attention is paid to finding constructive ways of coexistence of fiat money and cryptocurrencies. Reasons for this are as follows:

  • Possibility to tax the cryptocurrency. Potentially, this can significantly replenish the budget - very few governments are not interested in it.
  • The ban of cryptocurrencies may have a negative impact on the economy. It can provoke an outflow of investments.
  • The ban will deprive the government of the opportunity to monitor what is happening. Citizens will continue to conduct operations with cryptocurrencies but in the shadow sector. Many countries now believe that it is better to allow crypto and, thus, to take control over it (even if it is an undesirable phenomenon) than to face the impossibility to influence it.

There is a clear tendency to recognize and allow cryptocurrencies. Most of countries, including advanced economies, take this route. Those who have not yet decided on the status of digital money, in many respects are guided by the example of pioneers.

It is not known how many countries will eventually allow cryptocurrencies, and how many will prohibit them, but for the time being one thing is clear: cryptocurrencies are spreading, and it is no longer correct to talk about a worldwide ban.

Views: 48

Comment by Oliver Harvey on August 1, 2018 at 3:16am

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Comment by Patricia King on August 1, 2018 at 3:24am

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