What happens when the government bans businesses from accepting Bitcoins?

[Sword Smith]

I'm aware that Bitcoin is a decentralized system and it would be very difficult for any government or official body to take down in the traditional sense but I don't think they would need to actually shut it down to bring it under control. They would only need to put a law that bans any business from accepting Bitcoins, that alone would be enough to severely impair the system. No wise business would dare break such a law and incur criminal charges.

Bitcoin already is too slow in its payment confirmation process to be used in any real life retail scenario, so with online businesses also being shut out of the system, what else is left? Illegal activities, online casinos, services & digital products from small 'startups' or individuals, and just basic money transactions. If bitcoin based exchanges are also made illegal (because they also accept bitcoins when making sales), then what?

I'd love to hear a response to this highly possible scenario.

It is an excellent and fairly likely scenario that you describe. And there is a lot of BTC cheerleading in here so most responses are pretty useless as you can see above.

The scenario that you describe is likely to happen in many or some Western countries. The federal government probably has the power to do this and so does the European union. But the UN does not so each country would have to ban it if it were to be outlawed all over the world. Now imagine the scenario that it is illegal in every part of the world but it still has some kind of following since there are at least 100k people who currently holds Bitcoins and value them. If some ministate would then allow the exchange of Bitcoins to other currencies then this state/government would receive a huge revenue from this legalization since all the 100k users would need to trade through this country if they wanted to exchange Bitcoins for other assets. So a country would have a big incentive to remove this law if it was banned all over the world since it would bring revenue to that country. The exchange from BTCs to fiat currencies in just one country would increase the value of BTCs since one could trade goods for BTCs (privately) in a place were BTCs were banned and then, at some point travel to country were it was legalized and exchange to gov. fiat or other assets there.

So if BTCs are banned in USA and Europe but not i, say, Russia, the Carribeans and Australia, they would still be worth something and usefull in the US. And currently BTCs have found widespread use in these different countries which ensures that it is outside the grasp of a single legal entity to ban the use of BTCs.

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[bootlace]

I'm aware that Bitcoin is a decentralized system and it would be very difficult for any government or official body to take down in the traditional sense but I don't think they would need to actually shut it down to bring it under control. They would only need to put a law that bans any business from accepting Bitcoins, that alone would be enough to severely impair the system. No wise business would dare break such a law and incur criminal charges.

Bitcoin already is too slow in its payment confirmation process to be used in any real life retail scenario, so with online businesses also being shut out of the system, what else is left? Illegal activities, online casinos, services & digital products from small 'startups' or individuals, and just basic money transactions. If bitcoin based exchanges are also made illegal (because they also accept bitcoins when making sales), then what?

I'd love to hear a response to this highly possible scenario.

It is an excellent and fairly likely scenario that you describe. And there is a lot of BTC cheerleading in here so most responses are pretty useless as you can see above.

The scenario that you describe is likely to happen in many or some Western countries. The federal government probably has the power to do this and so does the European union. But the UN does not so each country would have to ban it if it were to be outlawed all over the world. Now imagine the scenario that it is illegal in every part of the world but it still has some kind of following since there are at least 100k people who currently holds Bitcoins and value them. If some ministate would then allow the exchange of Bitcoins to other currencies then this state/government would receive a huge revenue from this legalization since all the 100k users would need to trade through this country if they wanted to exchange Bitcoins for other assets. So a country would have a big incentive to remove this law if it was banned all over the world since it would bring revenue to that country. The exchange from BTCs to fiat currencies in just one country would increase the value of BTCs since one could trade goods for BTCs (privately) in a place were BTCs were banned and then, at some point travel to country were it was legalized and exchange to gov. fiat or other assets there.

So if BTCs are banned in USA and Europe but not i, say, Russia, the Carribeans and Australia, they would still be worth something and usefull in the US. And currently BTCs have found widespread use in these different countries which ensures that it is outside the grasp of a single legal entity to ban the use of BTCs.

Hey, thanks for the balanced response. I agree that a ban would most likely come from the US and the EU (who have the most to lose from Bitcoin gaining acceptance) but if Bitcoins would facilitate tax evasion then it could be a wider threat that any government would like to contain. If as we hypothesize, only a few handful countries like Russia don't ban it, then as you say that country would serve as the financial center of the bitcoin exchange...but I doubt it would be that lucrative because the size of the bitcoin market cap is just a fraction of a countries' GDP. Also the scenario doesn't solve the case of how Americans or Europeans would be able to transfer money to these Russian exchanges because they would need the help of American banks or banks in America to achieve this (who are the exact enemies who don't want you to use Bitcoin).

Even if there was a way to keep taking part in the bitcoin economy - the whole negative stigma associated with something illegal, inconveniences relating to circumventing illegal activities, lack of big businesses accepting it - all would put a severe dampen on Bitcoin's overall potential and would reduce it to a niche online currency and not the world changing technology that we were all hoping for. I think the main point here is that just having the currency system being decentralized is not enough - we also need decentralized corporations and exchange market places...and that seems to be beyond Bitcoin's technical limitations.

[Sword Smith]

It is an excellent and fairly likely scenario that you describe. And there is a lot of BTC cheerleading in here so most responses are pretty useless as you can see above.

The scenario that you describe is likely to happen in many or some Western countries. The federal government probably has the power to do this and so does the European union. But the UN does not so each country would have to ban it if it were to be outlawed all over the world. Now imagine the scenario that it is illegal in every part of the world but it still has some kind of following since there are at least 100k people who currently holds Bitcoins and value them. If some ministate would then allow the exchange of Bitcoins to other currencies then this state/government would receive a huge revenue from this legalization since all the 100k users would need to trade through this country if they wanted to exchange Bitcoins for other assets. So a country would have a big incentive to remove this law if it was banned all over the world since it would bring revenue to that country. The exchange from BTCs to fiat currencies in just one country would increase the value of BTCs since one could trade goods for BTCs (privately) in a place were BTCs were banned and then, at some point travel to country were it was legalized and exchange to gov. fiat or other assets there.

So if BTCs are banned in USA and Europe but not i, say, Russia, the Carribeans and Australia, they would still be worth something and usefull in the US. And currently BTCs have found widespread use in these different countries which ensures that it is outside the grasp of a single legal entity to ban the use of BTCs.

Hey, thanks for the balanced response. I agree that a ban would most likely come from the US and the EU (who have the most to lose from Bitcoin gaining acceptance) but if Bitcoins would facilitate tax evasion then it could be a wider threat that any government would like to contain. If as we hypothesize, only a few handful countries like Russia don't ban it, then as you say that country would serve as the financial center of the bitcoin exchange...but I doubt it would be that lucrative because the size of the bitcoin market cap is just a fraction of a countries' GDP.

Not if it is a very small country like Iceland or a Carribean state. These countries could see a large rise in relative revenue from an acceptance of Bitcoins, i.e., they would have a large incentive to legalize it.

Also the scenario doesn't solve the case of how Americans or Europeans would be able to transfer money to these Russian exchanges because they would need the help of American banks or banks in America to achieve this (who are the exact enemies who don't want you to use Bitcoin).

The beauty is that most people would not have to. If just one person can go there once in a while, he can transfer money for other people or make some kind of black market currency exchange which already exists for government fiat currencies in countries that have exchange rate controls - e.g. there is a large black market for dollar exchange in socialist Venezuela.

Even if there was a way to keep taking part in the bitcoin economy - the whole negative stigma associated with something illegal, inconveniences relating to circumventing illegal activities, lack of big businesses accepting it - all would put a severe dampen on Bitcoin's overall potential and would reduce it to a niche online currency and not the world changing technology that we were all hoping for.

Like a government ban on drugs or online file sharing? It may reduce the usefullness and thus value of BTCs but not destroy it.

I think the main point here is that just having the currency system being decentralized is not enough - we also need decentralized corporations and exchange market places...and that seems to be beyond Bitcoin's technical limitations.

I think this is what they are trying to achieve with Ripple but I do not know that system very well yet.

I think the main difference between our views is that I see the things which you can avoid when using BTCs, like laws, capital controls, inflation, taxes, money seizures are more damaging than you seem to believe - to be able to avoid these things is more important than the dangers you list, I believe.

[FreddyFender]

So you realize that to everyone it appears as 2 newbie tuesdays are going to tell everyone how big bossman government is going to decimate bitcoin and its adherents in some pre-planned, hi!-karate!-chop? I see red-herring FUD and not well-dressed arguments - answer D&T's questions and stop trading tin-hat drivel. We are not come-lately to the scene, and can help legit questions. Please be advised that we have ignore buttons and monitor troll/shill activity.

I am concerned that uniformed troll-piles suddenly descending on the forums might harm sincere newbies.
Have fun on the forums!

[madt]

I wouldn't care to much about governments but rather big investors that could potentially buy and freeze a huge portion of available bitcoins...

[bootlace]

I could be wrong but in the case of a stolen credit card being used, the seller of the product is not the one who incurs the charge, its the credit card companies who cover the cost.

That isn't true.  In case of fraudulent use the merchant not only loses 100% they also get to pay a charge back fee of up to $35.00 for the privilege of having accepted a card that was stolen (or owner simply claimed was stolen).  Worse CC companies make it simply impossible for merchants to avoid/prevent fraud (both third party friend and so called "friendly fraud").  Seller can do absolutely nothing to prevent (reduce the chance but never prevent all cases) fraud and then loses everything PLUS a penalty when it happens.

This isn't really the heart of this conversation, but it would seem that businesses still can have protection in case of stolen credit cards (while Bitcoin wouldn't have such a security):

"Who is ultimately held responsible for the charges will depend on the circumstances unveiled during a subsequent investigation. A spokeswoman for Wells Fargo tells MainStreet that in most cases Wells Fargo covers the cost of fraud."

Source: http://www.mainstreet.com/article/moneyinvesting/credit/debt/credit-qa-who-foots-bill-fraudulent-charges

[bootlace]

So you realize that to everyone it appears as 2 newbie tuesdays are going to tell everyone how big bossman government is going to decimate bitcoin and its adherents in some pre-planned, hi!-karate!-chop? I see red-herring FUD and not well-dressed arguments - answer D&T's questions and stop trading tin-hat drivel. We are not come-lately to the scene, and can help legit questions. Please be advised that we have ignore buttons and monitor troll/shill activity.

I am concerned that uniformed troll-piles suddenly descending on the forums might harm sincere newbies.
Have fun on the forums!

@FreddyFender: The arguments and questions presented here are perfectly reasonable and legitimate. I've already given the example of the puny entertainment industry, and how even they've been able to impact regulations well outside the United States, you only have to look at the new anti-piracy rules of ISPs, random shutdown of Megaupload, trials against Piratebay for examples of how they have clout way beyond the borders of their own country. You can ignore this issue all you want, I only brought it up because I was wishing to hear arguments assuring me that Bitcoin can't in fact be impacted by a few governments around the world (or just the US government even), but it seems as I feared that Bitcoin is not as bullet-proof as it is being billed.

I would think informing new Bitcoin users of this risk would be important so they can adjust their expectations accordingly and not be caught off-guard if one day it did happen. Don't really understand why you would use words like "FUD" "troll" "shill" "drivel" to describe this conversation.

[xenog]

If governments ban businesses from accepting bitcoins, they will reduce the government's own legitimacy, as many businesses will continue accepting them. Possibly larger businesses will be hurt, as they will most likely comply.

[Sword Smith]

So you realize that to everyone it appears as 2 newbie tuesdays are going to tell everyone how big bossman government is going to decimate bitcoin and its adherents in some pre-planned, hi!-karate!-chop? I see red-herring FUD and not well-dressed arguments - answer D&T's questions and stop trading tin-hat drivel. We are not come-lately to the scene, and can help legit questions. Please be advised that we have ignore buttons and monitor troll/shill activity.

I am concerned that uniformed troll-piles suddenly descending on the forums might harm sincere newbies.
Have fun on the forums!

I assume I am one of said newbies. Maybe you could reread my post and find a single unreasonable statement? If you are unable to do that, I would like an apology for your arrogance. I am no newcomer to economy, politics and institutional competition (the latter term you might want to Google).

[bootlace]

If governments ban businesses from accepting bitcoins, they will reduce the government's own legitimacy, as many businesses will continue accepting them. Possibly larger businesses will be hurt, as they will most likely comply.

Of course the government will be smart about it if they decided to take such action and not just say "this bitcoin thing hurts our ability to control the masses, we're gonna get rid of it". Instead they will exaggerate the 'negative' uses of it like terrorism financing, easy money laundering, tax evasion, gambling, drugs etc - which will easily satisfy the general population who don't know any better.. if you look at the way the mainstream media has covered Bitcoin thus far, you can already see people easily taking the whole drug buying aspect of it and blowing out of proportion which overshadows all of the wonderful sides of the Bitcoin technology.

[glendall]

Hmm interesting discussion!

[AnonyMint]

Government doesn't need to ban it, they can just require businesses to ask your identity and report it.

Anonymity would then exist only for businesses that are willing to be illegal. And then only for those who are careful enough and lucky enough to achieve technical anonymity. In short, not you. So don't worry about it. This does not affect you.

You don't think the banksters created bitcoin to allow you to be anonymous do you? No they created it so they can track your identity more closely. First they have to let you believe you have anonymity, then they take control over the block chain and the routers that all traffic passes through, then their 666 system is complete.

I didn't have time to read this thread, so apologies if I am repeating something somebody else already said.

[w0lfm4n]

Agreed with the people commenting on time for currency exchange...

I don't think it will ever be made illegal.  The banks will get frustrated eventually and control the market like they do for silver and gold.

[Sage]

Look at the macro trends...

Fiat is collapsing.

Euro zone imploding.

16.4T debt in the USA, 108% GDP.  The dollar cannot sustain that debt load.

Only a matter of time before Germany gets their currency back and the Euro is done!

What does that mean for a merchant?

...No trust in fiat.

They can make it illegal all they want, but a merchant's gotta do business.  If someone has gold, silver, platinum, and/or Bitcoins, do you think they are going to refuse the business, or take worthless fiat?

If they make it illegal, the transactions will simply be done off the books.

[Jocky]

I'm aware that Bitcoin is a decentralized system and it would be very difficult for any government or official body to take down in the traditional sense but I don't think they would need to actually shut it down to bring it under control. They would only need to put a law that bans any business from accepting Bitcoins, that alone would be enough to severely impair the system. No wise business would dare break such a law and incur criminal charges.

Bitcoin already is too slow in its payment confirmation process to be used in any real life retail scenario, so with online businesses also being shut out of the system, what else is left? Illegal activities, online casinos, services & digital products from small 'startups' or individuals, and just basic money transactions. If bitcoin based exchanges are also made illegal (because they also accept bitcoins when making sales), then what?

I'd love to hear a response to this highly possible scenario.

Bitcoin is pretty much legal, so this would probably never happen.

I have to agree, outlawing Bitcoin transactions is like outlawing e-mail. People have the right to send information over the internet, whether they accept it for trades is up to them.

[bootlace]

Government doesn't need to ban it, they can just require businesses to ask your identity and report it.

Anonymity would then exist only for businesses that are willing to be illegal. And then only for those who are careful enough and lucky enough to achieve technical anonymity. In short, not you. So don't worry about it. This does not affect you.

You don't think the banksters created bitcoin to allow you to be anonymous do you? No they created it so they can track your identity more closely. First they have to let you believe you have anonymity, then they take control over the block chain and the routers that all traffic passes through, then their 666 system is complete.

I didn't have time to read this thread, so apologies if I am repeating something somebody else already said.

Well none of my assumptions considered the conspiracy theory that some official body is behind this, but let me entertain your theory.

Why would the banksters create a system and then support a system that severely facilitates all sorts of illegal activities they would have no control over and removes most of the transactions fees and charges they can levy through being the middle man in the normal banking system. I guess you think this is some sort of CIA plot to catch criminals through a honeypot operation, but what about these 'mixer' services people can use to really remain anonymous...are those not effective? And the whole 'plot' would be revealed as soon as the first arrest is made or sign is leaked that anonymity is not assured, putting an end to this project of theirs. Seems like a lot of trouble, risk, and uncertainty by these megapowerful and arrogant bankers who probably view themselves as invincible at this point and needing a crazy operation like what you are suggesting.

[bootlace]

Look at the macro trends...

Fiat is collapsing.

Euro zone imploding.

16.4T debt in the USA, 108% GDP.  The dollar cannot sustain that debt load.

Only a matter of time before Germany gets their currency back and the Euro is done!

What does that mean for a merchant?

...No trust in fiat.

They can make it illegal all they want, but a merchant's gotta do business.  If someone has gold, silver, platinum, and/or Bitcoins, do you think they are going to refuse the business, or take worthless fiat?

If they make it illegal, the transactions will simply be done off the books.

Sure if some major crash occurs and the whole financial system needs to be replanned from the beginning, I'm sure the people will demand major changes and Bitcoin could play a signficant part in it. But assuming the status quo is extended and cans are kicked down the road as they have been for years now, I don't think a large percentage of business can afford to break such clear laws, especially when these businesses are mostly operating online and it would be very easy to see and report that they are still accepting Bitcoins.

Let's not forget that not too long ago, gold ownership was made illegal and that was a much 'cruder' technology.

[Sage]

Look at the macro trends...

Fiat is collapsing.

Euro zone imploding.

16.4T debt in the USA, 108% GDP.  The dollar cannot sustain that debt load.

Only a matter of time before Germany gets their currency back and the Euro is done!

What does that mean for a merchant?

...No trust in fiat.

They can make it illegal all they want, but a merchant's gotta do business.  If someone has gold, silver, platinum, and/or Bitcoins, do you think they are going to refuse the business, or take worthless fiat?

If they make it illegal, the transactions will simply be done off the books.

Sure if some major crash occurs and the whole financial system needs to be replanned from the beginning, I'm sure the people will demand major changes and Bitcoin could play a signficant part in it. But assuming the status quo is extended and cans are kicked down the road as they have been for years now, I don't think a large percentage of business can afford to break such clear laws, especially when these businesses are mostly operating online and it would be very easy to see and report that they are still accepting Bitcoins.

Let's not forget that not too long ago, gold ownership was made illegal and that was a much 'cruder' technology.

When gold was illegal you can bet there were plenty of gold transactions done on the underground.

It's easy enough for an online merchant to avert a bitcoin ban... simply incorporate in another jurisdiction.  And if namecoin and systems like it get enough traction, simply operate outside of any legal jurisdiction.

[Sword Smith]

Government doesn't need to ban it, they can just require businesses to ask your identity and report it.

Anonymity would then exist only for businesses that are willing to be illegal. And then only for those who are careful enough and lucky enough to achieve technical anonymity. In short, not you. So don't worry about it. This does not affect you.

You don't think the banksters created bitcoin to allow you to be anonymous do you? No they created it so they can track your identity more closely. First they have to let you believe you have anonymity, then they take control over the block chain and the routers that all traffic passes through, then their 666 system is complete.

I didn't have time to read this thread, so apologies if I am repeating something somebody else already said.

Well none of my assumptions considered the conspiracy theory that some official body is behind this, but let me entertain your theory.

Why bother?