Banning Bitcoin
Buy the rumor, sell the news
I’ve written before that, though the notion of banning cryptocurrency appeals to some people, doing so wouldn’t really solve the problems that the banners think it would.
A number of people have recently called for just that:
I responded:
I subsequently fleshed out my argument in a tweet thread:
The argument follows, in a more narrative form.
People suggest that the US government ought to ban bitcoin because bitcoin has been successfully used for extortion by ransomware hackers. While it is true that ransomware hackers have used bitcoin to extort companies and government agencies, it is not true that this will induce the US government to ban bitcoin.
What will happen is this: pressure will increase on politicians to “do something” about bitcoin, and they will, by proposing legislation that bans it. It is at this point that various law enforcement agencies will intercede, behind the scenes, to quash any such bill.
Why, you ask, would law enforcement agencies do this? We’ve already admitted that hackers use bitcoin to extort companies, and extortion is bad.
What this facile claim misses is that, in addition to hackers using bitcoin to extort companies, law enforcement uses bitcoin’s pseudonymous public ledger to track illicit payments and other crimes.
Law enforcement is not about to let the US Congress ban that which is a powerful tool to track criminals and terrorists. Chainalysis sells blockchain analysis tools to government agencies. You can even read a blog entry from a Chainalysis employee, formerly employed by the FBI, about why he joined the company:
[T]he emergence of cryptocurrency also has huge implications for law enforcement, national security, and geopolitical stability. Chainalysis has a deep understanding of the global cryptocurrency environment. We are already leading the way in equipping governments around the world to investigate cryptocurrency-related crime and enact sensible regulations.
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The financial system is a key part of any competition among world powers. As historian Niall Ferguson argues in his book The Ascent of Money, a country’s financial power usually translates to geopolitical power….The countries who drive the financial system tend to set the pace of world affairs. Could cryptocurrency be the next paradigm shifter? The emergence of a completely new asset class in modern banking is both rare and disruptive…cryptocurrency is clearly on a strong growth trajectory both as a new asset class and as a means of executing transactions. As cryptocurrency takes on a more prominent role in the world’s financial system and larger segments of the population and business join the blockchain, the countries leading the way in cryptocurrency will gain greater power and influence.
Given this, why would the US government ban bitcoin? It is more likely that the government will impose (or attempt to impose) additional regulations on bitcoin and other cryptocurrencies. But to ban Americans from using bitcoin (or other cryptocurrencies) would be to shut the US market and its jurisdictional oversight out of the global market. To do so would harm the US’s national security interests. If there is one thing that almost everyone in Washington, DC agrees with, it is that, for better or worse, national security interests trump virtually everything else.
When the investigatory prerogatives of law enforcement come into play, you can be assured that any movement to curtail their ability to use a tool will be quashed.