The idea of a government "outlawing" Bitcoin is laughable at best.
Is it possible? Yes, certainely, crazier things have been outlawed after all, just looking up "10 crazy laws" gives you a list of places that have outlawed things like riding naked on a horse or something around those lines
The thing is, if you outlaw Bitcoin (as any lawyer would understand) you'd have to use a very generalized and broad language, broad enough that you could possible end up banning SEVERAL forms of currency, which even if it's not called into right away sets a legal precedent that causes much more trouble than it's worth.
I don't think Cryptocurrency will entirely replace fiat currency, much alike "alternative" technologies didn't replace what came beforehand (like how TV did not replace Cinema or Cassete tapes did not destroy the Radio) it's an alternative way that works much better for a considerable ammount of people.
I would, first, note that there are many laws that we may laugh at now that were very serious at a time when they were approved.
It would probably be funny for contemporaries living 100 years ago to imagine that there will be a law that prohibits the posession of marijuana, that grows natuarally in abundance. Well, let's not even go to 100 years ago. How funny is it that there is a prison sentence in some Arab countries for sex outside of marriage and, possibly, capital punishment for a homosexual intercourse? Crazy laws are very real and are with us to stay, how do you disregard them?
Second, I don't see a very big difficulty in creating a law that targets specifically Bitcoin as the latter posesses certain unique attributes. Let me outline the scope of hypothetical law terms. Then I will ask you to try and find what else besides Bitcoin this hypothetical law would ban.
Terms:
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It is illegal to:
a) receive as a gift, inheritance, a payment for goods or services;
b) send as a gift, inheritance, a payments for goods or services;
a currency electronically unless a sending or receiving party is acting through a registered money transmitter.
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Besides, laws that makes it illegal to anonymously (and anonymously is the key word) exchange bitcoins for other forms of currency already exist and applied. This is why Dwolla, for one, is shut down and exchange operator is being prosecuted in Europe. After a bunch of people who were bitcoin pioneers are slapped with fines or sentenced and are no longer interested in running exchanges, where will the exchanges go? My guess, to some lawless jurisdiction, like Nigeria.
How do you feel doing business with exchange based in Nigeria?
I can see how that would invalidate what I laid down, i'm unfortunately not an expert on law after all
It's an interesting and rather frightening realisation really. That progress such as Bitcoin can be stopped so bluntly by people willing to in high positions.
I can still say however that it would set a presedent that would be hard to avoid if not troublesome since it stops many other ways of actual registered businesses and currencies to continue to grow, "evolve" even.
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