“You’d have to shut down the internet.” Hester Peirce, Commissioner to the U.S. Securities and Exchange Commission (SEC) on implementing a Bitcoin ban.
Although Bitcoin’s market capitalization has surpassed $1 trillion, statements from governmental authorities and business leaders continue to fuel speculation about a U.S. ban on bitcoin. U.S. Treasury Secretary, Janet Yellen, has publicly criticized Bitcoin and other cryptocurrencies for their role in “illicit finance.” In the private sector, Ray Dalio, founder of the world’s largest hedge fund, has commented that Bitcoin may be outlawed just as gold was in the 1930s. Jesse Powell, the CEO of Kraken, a U.S.-based cryptocurrency exchange, has also warned that “there could be some crackdown” on the digital assets.
Could the United States implement such a “crackdown” by joining countries like India, Nigeria and Turkey in implementing a ban on Bitcoin? While a complete ban is certainly feasible, the practical, legal, economic and political difficulties of implementing such a ban make it unlikely. Instead, we can expect the U.S. to join other developed economies in further regulating Bitcoin. Regulators will face the challenge of writing laws that can be enforced without strangling the new opportunities for economic growth that Bitcoin offers those countries that embrace it.
A basic understanding of blockchain technology underscores the practical challenges of a Bitcoin ban.
“Blockchain” describes a decentralized and distributed ledger that records the histories and transactions associated with digital assets. Bitcoin is a virtual asset that is accessed and recorded on such a blockchain.
The term “cryptocurrency” is a slight misnomer since Bitcoin is more like a decentralized network than a traditional currency that can be held or confiscated from a regulated custodian. Instead of holding physical “coins” or having access to an “account” with a regulated third…