Key Takeaways
- Chair of the US Banking Committee has urged a ban on all cryptocurrencies
- Many declare that crypto is resistant to authorities shutdowns, however this is solely true immediately
- By attacking the ecosystem and the means to entry it, crypto could be curtailed considerably by lawmakers
Bitcoin can’t be shut down, so the saying goes. But this misses the point.
Firstly, let me be clear and affirm that this mantra is true, technically at the very least. Bitcoin exists on the Internet and therefore it is resistant to being shut down. Unless, after all, you someway shut down the Internet. But for all intents and functions, Bitcoin is decentralised and exists in the on-line world, a feat of expertise that makes it resilient to being restrained.
Bitcoin can’t be shut down immediately, however not directly is a distinct story
But whereas a direct shutdown of the blockchain is unimaginable, governments can, at the very least theoretically, dent Bitcoin closely and curtail its adoption by the lots. It may not qualify as technically shutting it down, and I’m not commenting on the probability that this occurs, however there is little doubt that if a concerted sufficient effort is made, an assault by lawmakers on Bitcoin could possibly be devastating.
We want solely have a look at the prevalence of centralised entities in the area. While Bitcoin itself is decentralised, to ensure that the lots to entry it, the overwhelming majority go by way of centralised firms reminiscent of Binance or different exchanges. And what occurs if governments go after these firms?
These firms will probably be pressured to abide by the legal guidelines. Sure, decentralised exchanges (DEXs) will stay, and like Bitcoin itself, are resilient to being immediately shut down. But would you anticipate Bitcoin to realize mainstream success and proceed to develop right into a respectable monetary asset if DEXs have been the solely possibility?
Not solely would establishments be reluctant to pursue this route, however they might additionally simply be banned from holding it.
US Banking Committee Chair counsel banning cryptocurrencies
I write this text now in the wake of the story which emerged concerning the US Banking Committee Chair, Sherrod Brown, suggesting a ban on cryptocurrencies.
Brown stated:
“I’ve already gone to the Treasury and the Secretary and asked for a government-wide assessment through all the various regulatory agencies. … The SEC has been particularly aggressive, and we need to move forward that way and legislatively if it comes to that.”
It has been scoffed at in some quarters, however it’s value being attentive to. The US is the monetary capital of the world. Were the SEC to come back out and ban it, this might have a seismic influence.
Think of the chunk of the market that could possibly be forbidden from holding Bitcoin – establishments, pension funds, public firms, and so on. Or all the infrastructure that can be torn down, reminiscent of exchanges.
On the flip aspect, it does stay a distant risk. And getting again to my point earlier about how folks overlook the potential for governments to shut Bitcoin down, Brown did acknowledge that “We want them to do what they need to do at the same time, maybe banning it, although banning it is very difficult because it would go offshore, and who knows how that would work.”
Final Thoughts
I’m not predicting any type of demise for Bitcoin or crypto off the again of this. I simply suppose that too many overlook how damaging governments could be in the direction of the world’s greatest cryptocurrency.
Sure, the fantastic thing about the blockchain is that it can’t be shut down immediately. But not directly? That is a distinct story. Governments carry an excessive amount of energy to be written off as “irrelevant” with regards to Bitcoin.
So far, there is nothing to suppose that international locations reminiscent of the US will make such drastic strikes to ban crypto. But after a torrid 2022 that has seen scandal after scandal rock the area, feedback reminiscent of Sherrod Brown’s aren’t stunning.
In the distant risk that these phrases have been ever put into motion, it could be silly for traders to put in writing it off as a benign improvement for crypto.
