Image: Monopoly Miner Panning for Bitcoin, 2022 by Alec Monopoly
₿itcoin FUDsters around the world have been promising us that governments will simply ban Bitcoin. But, which government? Apparently, that doesn’t matter. According to such FUDsters, all you need to know is that Bitcoin is toast as soon as it becomes a threat to the existing financial order. Because, you know, “the government” will just ban it.
Let me give you five reasons why you should dismiss any such government-will-ban-it-related-FUD that’s fired your way. I want to arm you with the arguments you need to shut down any Fear, Uncertainty, and Doubt that may come your way, once and for all.
1. You Can’t Ban Bitcoin (really).
The first way to fight FUD is to question the assumption that Bitcoin can, indeed, be banned. This is the foundation of all other government ban FUD, so taking it out from the get go will help you fight the FUD more effectively in the long run.
To be honest, there are a couple of Bitcoin-related activities that governments can ban. For instance, the Chinese government banned Bitcoin mining and trading in 2021, which ultimately forced miners and exchanges to not quit, per se, but rather move out of the country. So, not an effective ban on Bitcoin, at all, really.
Aside from outlawing in-situ mining and converting fiat-to-Bitcoin transactions, no government in the world can really, meaningfully “ban” Bitcoin itself. Bitcoin is, in fact, censorship-resistant, meaning it is extremely cumbersome and difficult for any government or other third party to intercept transactions, block users, or seize an individual’s self-custody Bitcoin.o.
What’s infinitely more likely is that the network will keep ticking over – tick tock, next block – regardless of any legislative ban a government might wish to impose. In fact, Chinese citizens can still hold, send, and receive BTC, they just can’t swap their stack back for Yuan (which is a complete shit-coin).
2. Why Kill the Golden Goose?
Whether or not governments can practically ban Bitcoin, there are several reasons why they are heavily incentivised not to. One reason is that by enacting bans, governments risk hurting a large—and rapidly growing—chunk of their economies.
Bitcoin mining in the U.S. alone is capable of generating a tax receipt of some $299 million, according to one particular model put forward by CoinDesk. Meanwhile, the publicly listed exchange, Coinbase generated profits of $1.6 billion in the first quarter of 2021, giving the taxman another large windfall well into the hundreds of millions.
Beyond tax revenue, the arrival of institutional buyers means that banning Bitcoin would also hurt economies more broadly. Tesla held nearly $2 billion in Bitcoin at the end of 2021, and Michael Saylor’s MicroStrategy holds up to $6 billion. With more companies and corporates sure to follow, as Bitcoin’s game theory unfolds, banning Bitcoin will increasingly go against the interests of every nation’s economy.
3. Game Theory
Now, nation states have entered the chat. In 2021, El Salvador made Bitcoin legal tender, becoming the first nation to do so by formally accepting Bitcoin as a national currency. The country’s treasury has since purchased millions of dollars’ worth of BTC, and has plans to issue a Bitcoin-backed bond, which has already attracted a potential $500 million from would-be investors.
A recent report by Fidelity, one of the biggest asset managers in the world, predicts that 2022 could see more nation states (and maybe even central banks!) adopt Bitcoin. The report reads:
“There is very high stakes game theory at play here, whereby if Bitcoin adoption increases, the countries that secure some bitcoin today will be better off competitively than their peers.”
The idea here is that as Bitcoin proliferates, nations will be compelled to buy at least a small amount of BTC, lest they find themselves in a Bitcoin-standard world with only worthless fiat money to play with. Fidelity even weighed in directly on the futility of government bans:
“An outright ban will be difficult to achieve at best, and if successful, will lead to a significant loss of wealth and opportunity.”
4. What Doesn’t Kill Bitcoin Makes it Stronger
A Bitcoin ban – regardless of the practical possibility – can’t meaningfully hurt Bitcoin anyway.
The most recent and concrete ban on Bitcoin in China actually had a net-positive impact on the Bitcoin network. While the price did plunge, momentarily, along with hash rate, the ban merely forced miners to move out of China and into neighbouring Kazakhstan, and even across the Pacific into the U.S. Soon after, both price and hash rate began to recover and now the network’s hashrate has continued to hit all time high’s, signalling that Bitcoin is even better off after the attempted ban, at least according to this very important metric.
Just like that, the Chinese government ban was all but forgotten about.
The added bonus? The vast majority of Bitcoin’s hash rate is now located outside of a totalitarian state, and the Bitcoin network is even more robust and even more geographically decentralised than it was last year. Once again, a ban on Bitcoin is super ineffective.
5. All Bark and No Ban
With the exception of China – the most authoritarian nation state on the planet – almost all Bitcoin “bans” are just cheap government jawboning. It should be noted that China has famously “banned” Bitcoin multiple times in recent years, leading many who pay attention to such things to question the efficacy of bans that need to be continuously re-enacted across the globe.
The last couple of years alone are littered with examples of clickbait headlines from cursory journalists warning of various impending Bitcoin bans all across the world. Almost all of these have turned out to be just that: clickbait; literal and actual fake news.
Bitcoin was “banned” in Turkey last year, but the Turks are still buying Bitcoin to escape inflation. Russia’s central bank threatened to ban Bitcoin, before regulators decided that taxing it was a better idea.
India talked perhaps the biggest game of all, teetering on the edge of a ban for years, before caving to common sense and instead attempted to impose a hefty 30% tax on transactions.
The list of reasons to ignore government will ban it FUD goes on, but the point is clear. It comes down to this:
- Governments are heavily incentivised not to ban Bitcoin
- Banning Bitcoin is almost impossible in practice
- Bans that are considered “successful” only make Bitcoin stronger
Bitcoin is not only censorship-resistant, inflation-resistant, game theoretically brilliant, and immune to any single point of failure, Bitcoin is anti-fragile.
So, you can see why such any “government will ban it” FUD is just that? FUD.
Fight it whenever you can.
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