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Bitcoin: Too Big To Ban?

2021 was a significant bull year for several currencies that was led by Bitcoin (BTC), the world’s foremost cryptocurrency in terms of market capitalization. Bitcoin shot towards an all-time high, approaching almost $62,000 per bitcoin. On April 12, 2021, over 13,000 bitcoins were transacted every hour.

This year’s value has not only increased but also has seen record growths over the last term. Since its previous bull run in October 2020, Bitcoin has surged to almost 500% in value. The cryptocurrency stopped its sharp rise in value in March of 2021.

However, analysts and investment experts warn that the surge in value could easily lead to Governments imposing restrictions on trading Bitcoin, including a Bitcoin ban.

Ray Dalio on Governments Banning Bitcoin

According to Ray Dalio, founder of the largest hedge fund in the world, a Bitcoin ban might be very ‘likely,’ citing the currency’s rapidly rising value as a core cause.

Dalio says, “every country treasures its monopoly on controlling the supply and demand,” and countries like India are already proposing a Bitcoin ban before the currency’s value gets out of hand.

The legendary investor explains that Governments don’t want other currencies interfering with their supply and demand monopoly.

Dalio points to the reports of a law restricting Bitcoin ownership and trading in India as the foundation for stricter worldwide Bitcoin laws.

Concern Over Bitcoin Being Used to Finance Illegal Activities

The inherent anonymity of the cryptocurrency being used to finance illegal activities is of particular concern. Governments are demanding ways to effectively track Bitcoin transactions, which is not possible with hundreds of thousands of transactions every day.

Silk Road, an online marketplace on the Dark Net from 2011 to 2013, traded more than 9,519,664 Bitcoins in payment for drugs.

However, it is important to remember that while Bitcoin provides the opportunity for transactional anonymity, this doesn’t mean all cryptocurrency is used for illicit purposes. Cryptocurrency is valued worldwide for being an easy-to-move currency, which appeals to every industry.

A recent study by Chainanalysis.com points out that only 2% of all Bitcoin transactions are used for illegal purposes, a stark contrast to claims that Bitcoin is a tool for criminal activity.

SEC Hester Peirce on Bitcoin Ban

Who is Hester Peirce?

Hester Peirce is an American lawyer who specializes in financial market regulation. Peirce has been on the Securities and Exchange Commission for two years now and is well known as an authority on cryptocurrency. Peirce has often been a lone voice arguing in favor of ETF applications for the Government.

She states that (according to her views not the SEC’s or her fellow Commissioners’), the advantages of cryptocurrency present overwhelming opportunities for governments.

Hester Peirce at MarketWatch Virtual Panel Discussion

In a virtual panel discussion organized by MarketWatch that has since become iconic, Peirce said about Bitcoin “I don’t see how you could ban it”, in fact it would “be foolish for governments to try”.

She explains that while governments could impose laws on the trading and transaction of Bitcoin, these would be impossible to enforce without ”shutting down the internet.”

According to Hester, the important thing is for the United States to have a clear crypto regulatory framework to provide a set of rules for Bitcoin transactions, rather than banning the use of the cryptocurrency altogether.

On the Flipside

  • While a Bitcoin ban might not be likely, investors should still prepare for regulatory changes in cryptocurrency. The current market value of Bitcoin makes it impossible for governments to ignore it altogether.
  • An Indian bill penalizing the possession and trading of cryptocurrency is currently under development. Indian officials say traders and investors will be allowed six months to liquidate their crypto assets before being penalized.
  • Many United States government officials, including Treasury Secretary Janet Yellen and Fed Chairman Jerome Powell, believe Bitcoin is ‘not really useful as a store of value.’

Analysis: Is a Bitcoin Ban Imminent?

A ban on Bitcoin is very unlikely, considering the sheer amount of effort and resources it would require to enforce. Ray Dalio, the legendary investor who previously warned about a possible Bitcoin ban, admits that Bitcoin came into its own as a successful, legitimate speculative asset.

Experts agree that trying to ban Bitcoin in India would harm the Indian economy. Instead, such a move would likely only drive a legitimized way of transferring money quickly underground.

It does seem effectively impossible to stop Bitcoin trading in any country completely. Cryptocurrency investors could easily store their Bitcoin in cold storage and use foreign crypto-exchanges to make transactions without incurring legal penalties.

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed to be financial legal or tax advice. Trading Forex, cryptocurrencies, and CFDs poses a considerable risk of loss

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