Bitcoin Forum

http://www.forbes.com/sites/jonmatonis/2013/01/28/government-ban-on-bitcoin-would-fail-miserably/

Because Bitcoin does not require trust in a financial intermediary (e.g., a bank) it is an incredibly efficient method for transferring amounts large and small.  For international money transfers it is swifter than SWIFT (clears in an hour and non-reversible.  It is less costly than PayPal.     

A government that intentionally hobbles its economy by taking steps to outlaw or prohibit the open use of Bitcoin will find itself drop versus competitor nations that are more accommodating of it. 

Exactly. When people express concern about the "government banning Bitcoin" issue, they invariably fail to think about governments that WON'T ban it, i.e. China. Bitcoin is an ideal vehicle for any government trying to keep their national currency artificially low. Banning a p2p system is unwise in any event, but it really is an all or nothing proposition. If just one of the big players doesn't go along with the ban, it will backfire for the governments trying to impose it and work to the advantage of those that don't.

I agree with the general conception in the article, however i think that this "Forbes guy" is coming on too strong.
Sooner or later he will make "somebody important" somewhere angry and governments will start "Bitcoin prohibition" campaign.

I still think that Bitcoin will win (sooner or later), but i seriously doubt we need this kind of publicity.

Stephen,

Sadly, governments do not care about efficiency in payments. If they did, they would not be attaching massive amounts of paperwork and compliance via AML which adds complexity and even more cost. Governments care about traceability and identification within the system. That is their dominant care.

Other competitor governments that do not likewise "hobble" their economy via FATF/OECD compliance will undoubtedly find themselves in the same position as the "grey" list or "black" list countries of today. The situation today proves that efficiency/speed of international money transfers is not a competitive advantage weapon for nation-States, because they all come into line with the exception of Iran and North Korea. The current empirical evidence shows that even somewhat accommodating nations like Cyprus, Mauritius, Liechtenstein, Gibraltar, etc have actually come more into the fold via tax treaties and coordinated AML/KYC banking guidelines.

Why would you think China won't do it? It's already illegal to use virtual currencies to buy physical goods in China. http://www.informationweek.com/internet/ebusiness/china-limits-use-of-virtual-currency/218101859

This begs the question: Has China already banned Bitcoin? In particular is the Chinese government's definition of "Virtual Currency" broad enough to include Bitcoin?

Yes, for the people, it's illegal. Just as it's illegal for the people of Cuba to use any currency other than their national one. But the government very happily deals in CUCs (Cuban Currency Units) which trade at hyperinflated prices, and are the only currency you can use in the country if you're a foreigner.

The currency duality is something that totalitarian governments have used to their advantage dozens of times.

Say China wanted to deal with a foreign country, buying all the soybean crops in Paraguay, for instance. Every time they do this in US dollars, they're effectively acting contrary to their own interests. Yet, at present, there's little choice but to do that, as they cannot use their own (highly devaluated) currency. BTC could become a very tempting alternative.

How convenient that Jon Matonis is licensed to practice law in every contry in the world - including China and North Korea. Bitcoin sure attracts many talented and insightful people.

Don't forget the trolls. It attracts plenty of those too.

The point is not if the USG or all Gs can declare bitcoin illegal. They obviously can (constitutions be damned).
The point is, "can they shut down the network?"
The obvious points to shut down are the miners, because without them the network lose the computing power needed to maintain the trust.
But, the miners can be really be shutted down? Or can they simply go underground and use TOR to communicate with the network like Silk Road do already?

If they do the network would be resilient enough to be able to recover from every attack.

Drug cartels could simply finance (directly or indirectly) miner operations to keep up a network they could use to pay each other and their organization collaborators (and profit from others using it).
They could use paper cash and banks (they do it already) but Bitcoin have its advantages (like no need to stash tons of paper cash around or making business with shady treacherous banksters that could sell you down the road to police in the future).

The government would be forced to attack the little fishes, where the cost of repression go up fast.
First because there are so many you can not kill or jail them all without repercussions.
Second because many of them will have connections and the police want not problems with politicians of judges when they arrest the son or the wife or the pusher of some politicians, judge, cinema divas, etc.
Third, because policemen must live in contact with the chum of the earth and they will prefer to turn a blind eye when they can. If everyone you see could be arrested and sent in jail for five years minimum, someone you try to arrest will probably react violently and the others will sympathise with him and could help him (even some other cop - because even cops have children, wives, use drugs, etc.).

Man you almost make it sound as if cops are human beings...

When they know their actions have consequences for them they suddenly start behaving like human beings.

These are two very important points. Thus, Bitcoin has a Sebastian Shaw like effect (http://www.youtube.com/watch?v=XdVl9x06DKI).

Sadly, there is no government that will not hobble its economy in order to further its political goals.

This.

In fact, this is exactly what we are seeing in a lot of places, take for example Italy...