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Author Topic: For those of you who say governments can't ban bitcoin  (Read 4549 times)
skooter
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March 30, 2014, 07:38:33 PM
 #1

Sure they can. They can't get rid of the protocol, but they can make it useless.

Let's say for you have a totalitarian country.

They can make a law saying that they'll execute anyone who uses bitcoin. Nobody would dare touch it anymore. That's an extreme, but it's still possible in some countries (more realistically they'd seize your assets).

For a country like the US. The government probably can't make it illegal to possess or use bitcoin, but they can do the following to effectively kill it:
- Give it unfavorable tax treatment
- Force merchants who accept it to adhere to complex and expensive accounting rules, so that it's not economical to accept it as payment for any legitimate business
- Call it a counterfeit currency and prosecute people who try to use it. (2 words: Liberty Dollar). I don't care if you want to believe it or not, but if you print up your own money (even if it doesn't resemble US dollars at all, eg. Bitcoin bills), go to a store, and try to pay with it you CAN get in trouble.
- Make a few high profile examples. Find a company doing bitcoin mining who's books aren't correct to the letter, seize their assets. Find a bitcoin user who didn't report capital gains on their coins and throw them in jail for tax evasion.
- Use the fact that bitcoin is commonly used for criminal purposes to have law enforcement harass bitcoin users. Government can seize coins that are traced to have been used in illegal activity (or if the government SUSPECTS they were used in illegal activity). This can easily be done to merchants by mandating they report transactions and wallet addresses. The govt could even go a step further and mandate that merchants give access (private key) to those wallets to a govt agency.

Sure, things like drugs are illegal and are a thriving economy, but that's different. You can't grind up a bitcoin, snort it, and get high, so if the government hassles people who use it, and no legitimate business will accept it because it's too much of a pain in the ass, nobody is going to bother using it unless they want to use it to buy drugs online or something.
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crazynoggin
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March 30, 2014, 07:51:32 PM
 #2

I say goodluck to any government who thinks it is easy to seize a Bitcoin wallet. Maybe people should start using brainwallets so that they can always access their funds even if a government thinks they "seized" the wallet. You still can't kill it, there will still be people who use it, it will just be pushed underground. Even if a government will punish someone by death if they use i, there will still be people who use it, just as there are people who will kill others even though it can be a offense punishable by death in many places.

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skooter
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March 30, 2014, 07:59:38 PM
 #3

I say goodluck to any government who thinks it is easy to seize a Bitcoin wallet. Maybe people should start using brainwallets so that they can always access their funds even if a government thinks they "seized" the wallet. You still can't kill it, there will still be people who use it, it will just be pushed underground. Even if a government will punish someone by death if they use i, there will still be people who use it, just as there are people who will kill others even though it can be a offense punishable by death in many places.

Again, this applies to legitimate business, and people who don't want problems with the law, which are the majority.

Obviously criminals don't give a shit about following regulations.

What I'm saying is, the government can easily block it from becoming mainstream. Some people here have this idea that bitcoin can compete with the central banking system. The reality of it is, the major governments of the world won't let that happen.
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March 30, 2014, 08:06:29 PM
Last edit: April 03, 2014, 07:57:25 PM by Beliathon
 #4

Sure they can. They can't get rid of the protocol, but they can make it useless.

Let's say for you have a totalitarian country.

They can make a law saying that they'll execute anyone who uses bitcoin. Nobody would dare touch it anymore. That's an extreme, but it's still possible in some countries (more realistically they'd seize your assets).

For a country like the US. The government probably can't make it illegal to possess or use bitcoin, but they can do the following to effectively kill it:
- Give it unfavorable tax treatment
If they can't kill it with law (as you have already conceded), they can't effectively tax it with law, either.

Neither of these two methods will be effective is because they are unenforceable for the same reason copyright law is unenforceable.

It is a problem of scale. 150 million Americans today illegally download movies, music, and other culture. You cannot win a battle against that many law-breakers, without draconian, liberty and creativity-suffocating bullshit legislation that will make everyone despise you, and will slowly but surely erode your legitimacy.

Bitcoin doesn't have 150 million Americans using it today. But it will, and when it does, it's game over for any government that behaves like a parasite.



P.S.

Remember Aaron Swartz, a 26 year old computer scientist who died defending the free flow of information.
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March 30, 2014, 08:13:24 PM
 #5

I think Liberty Dollar is a poor example for two reasons.  One, it was made to look very similar to US coin and two, it was centralized so it was very easy to kick down a door and shut it down.  Neither applicable to Bitcoin.

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March 30, 2014, 08:21:58 PM
 #6

Sure they can. They can't get rid of the protocol, but they can make it useless.

just like they got rid of the alcohol distilleries of the last century (prohibition era). hmmmmmmm, yet people found a way to still get drunk

weed, cocaine, heroine is illegal. yet people find a way to get stoned

being naked in public is illegal. yet people still find a way to go skinny dipping, visit naturist resorts or nude/topless beaches.

a government ban never means game over

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March 30, 2014, 08:23:26 PM
Last edit: March 30, 2014, 08:40:06 PM by amspir
 #7

Sure they can. They can't get rid of the protocol, but they can make it useless.

Let's say for you have a totalitarian country.

They can make a law saying that they'll execute anyone who uses bitcoin. Nobody would dare touch it anymore. That's an extreme, but it's still possible in some countries (more realistically they'd seize your assets).

Just to be clear, you state suppositions, none of this has happened.


Quote
- Give it unfavorable tax treatment
The last move by the IRS gives preferential tax treatment for long term capital gains,  but not good for miners that mined at a high BTC price and sold at a lower price.  In essence, they did not realize they were speculating between mining and realizing the profit.

Quote
- Force merchants who accept it to adhere to complex and expensive accounting rules, so that it's not economical to accept it as payment for any legitimate business

This is silly.  You are supposing that a merchant has the technology to accept bitcoin, but is unable to keep track of bitcoin sales and access historical price data.  They have apps for that.

Quote
- Call it a counterfeit currency and prosecute people who try to use it. (2 words: Liberty Dollar). I don't care if you want to believe it or not, but if you print up your own money (even if it doesn't resemble US dollars at all, eg. Bitcoin bills), go to a store, and try to pay with it you CAN get in trouble.

This was a centralized money system run by people with strong anti-government views.   I'm not saying it was right to prosecute them, but they made themselves a target.

Quote
- Make a few high profile examples. Find a company doing bitcoin mining who's books aren't correct to the letter, seize their assets. Find a bitcoin user who didn't report capital gains on their coins and throw them in jail for tax evasion.

This is a supposition with no evidence that it's going to happen.   Currently, the IRS has been starved of money by conservative forces in the government, which prevents them from collecting a lot of taxes (even though stronger enforcement would bring in more revenue than would be spent on enforcement.)   According to IRS statistics, the chance that a person making 50K-70K a year has a 0.7% chance of a tax return (or a non-existent tax return with reported W2 or 1099 income) being examined.   Over 5 years, that's about a 3.1% chance of getting caught.

Quote
- Use the fact that bitcoin is commonly used for criminal purposes to have law enforcement harass bitcoin users. Government can seize coins that are traced to have been used in illegal activity (or if the government SUSPECTS they were used in illegal activity). This can easily be done to merchants by mandating they report transactions and wallet addresses. The govt could even go a step further and mandate that merchants give access (private key) to those wallets to a govt agency.

In regards to illegal activities, many jurisdictions (as a revenue generating procedure) will seize large amounts of cash from travelers on interstate highways as suspected drug money.  This is nothing new, and nothing inherent to bitcoin.

In reality, the majority of merchants will convert immediately to fiat and not speculate on bitcoin.  The government is more likely to give merchants a Cyprus-style haircut through their bank accounts than to demand direct access to any bitcoins they hold.   Cyprus haircuts would be very unpopular, and in the United States, the history has been to support sick financial institutions by selling T-bills to prop them up (taxing dollar holders in a non-obvious way)

Supporting legitimate business using bitcoin is the way to go, to reduce the stigma of illegal activity, which makes it harder for the government to use the "illegal activities" excuse to crackdown on bitcoin.

Quote
Sure, things like drugs are illegal and are a thriving economy, but that's different. You can't grind up a bitcoin, snort it, and get high, so if the government hassles people who use it, and no legitimate business will accept it because it's too much of a pain in the ass, nobody is going to bother using it unless they want to use it to buy drugs online or something.

Even if the government totally cracked down on bitcoin, there would still be a bitcoin economy -- street level bitcoin dealers that traded bitcoins for cash to users that gambled and bought drugs through the internet.  

I see the future of bitcoin as positive, as legitimate money is being invested in bitcoin services and merchants.  It will reach a tipping point where it becomes a significant portion of the legitimate economy, where a crackdown would cause harm to the country as a whole.
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March 30, 2014, 08:26:31 PM
 #8

does not matter

this was the same approach to file sharing (napster, megaupload), how did that turn out



the purpose of bitcoin is to provide people with their own money not controlled by banks or finance for their own personal gains out of our money.

if bitcoin is illegal something else will arise, or people will be smart enough to dodge legislation

if that is then illegal something else will arise

and so on and so on

to completely make bitcoin illegal, every country will have to unite (never gonna happen)

example. I buy bitcoin in USD on swiss exchange as bitcoin is legal, exchange back to USD on swiss exchange rinse and repeat






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March 30, 2014, 08:31:11 PM
 #9

...
For a country like the US. The government probably can't make it illegal to possess or use bitcoin, but they can do the following to effectively kill it:
...

All true.  The main problem with that is that distributed crypto-currencies are quite new and under rapid evolution.  They will probably adapt rather quickly to whatever pressures one puts on them.  It seemed like a great idea to treat everything with antibiotic compounds for a while.  Whaddayaknow, but suddenly there were a lot of resistant bacteria strains popping up at an alarming rate.

If 'the powers that be' are smart they would treat this issue with kid gloves and significant caution and thoughtfulness at this juncture.  Whether that is what is happening in certain countries now or not I have no idea.  I think it would be a mistake to consider the leaderships to be mentally challenged whether it happens to be the case or not.


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March 30, 2014, 08:57:04 PM
 #10

The paranoia libertarians who sit around and imagine horrible things that could happen in their minds 24/7 are more of a threat to virtual currency then anything.  "You know what could happen if I leave the house today?  I could get run over by a car, I could get sick from someone coughing on me, I could get shot by a stranger.  OMG I'd better never leave the house."  Could any of the above happen?  Of course.  Is any of the above likely to happen?  I highly doubt it.  About the same odds of my leaving the house scenarios.  Without main stream adoption, virtual will never go up in price.  Paranoid fringe people scare mainstream people.  Not me but Im not mainstream.

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March 30, 2014, 08:59:18 PM
 #11

LOL have you ever seen "governments" work together? Last time I heard about such cooperation was during WWII.


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March 30, 2014, 09:01:52 PM
 #12

Keep in mind this isn't gold.  Bitcoin relies on the internet which the USA currently controls.

They could force ISP's to block or throttle it to a crawl or they could simply use their resources to fork it if they wanted to destroy it.  I think it'd be very simple for any major government to pull off a 51% heist.

Considering recent news about what the government HAS done I find it impossible to believe they couldnt shut it down.

With that said, they took a stance and doesnt look like they'll ban it.  Hard to ban something they can tax
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March 30, 2014, 09:04:31 PM
 #13

...
For a country like the US. The government probably can't make it illegal to possess or use bitcoin, but they can do the following to effectively kill it:
...

All true.  The main problem with that is that distributed crypto-currencies are quite new and under rapid evolution.  They will probably adapt rather quickly to whatever pressures one puts on them. It seemed like a great idea to treat everything with antibiotic compounds for a while.  Whaddayaknow, but suddenly there were a lot of resistant bacteria strains popping up at an alarming rate.
Excellent analogy.

Remember Aaron Swartz, a 26 year old computer scientist who died defending the free flow of information.
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March 30, 2014, 09:06:14 PM
 #14

Here's the catch, governments have companies like facebook, google and others working around the clock to provide internet and online gadgets to every nutcase stalking about out there, so that we can all be happy citizens in their brave new surveillance state, and that will make crypto-currencies like bitcoin even stronger than they already are.

The truth is, from a technical viewpoint, they can't touch it.
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March 30, 2014, 09:09:22 PM
 #15

Drugs, alcohol, etc.. people get high or get some kind of pleasure out of it. Again, you can't grind up a bitcoin and snort it to get high. Heroin addicts have a desperate need to inject more heroin into their veins.

And a lot of what the government does is indeed a scare tactic. But it does work. How many people file their taxes honestly because they're afraid of an audit? And legitimate businesses like amazon have to comply with the law. If the government passes a regulation saying that they need to have access to everyone's bitcoin wallets (just like they have access to everyone's bank accounts, and have the ability to seize/freeze assets), individuals who don't comply likely won't have anything happen, but you can bet that major businesses will be complying. Without major businesses accepting it, it can't go mainstream and it'll just be a drug trader currency.

Look at what happened with online poker a decade ago. Government got involved, seized bank accounts, forbid banks from doing business with online gambling sites, etc etc.

They didn't have to go after individuals to cripple something, they go after the big institutions.

So for bitcoin, if they want individuals to comply with laws, they could set up an agency where you have to register your bitcoin addresses with (and possibly give them access to freeze/seize your funds if they deem necessary). If you don't have a valid registration with that agency, banks will not allow you to do any transactions related to bitcoin (eg, wire transfer to an exchange). The government would use the banking system to enforce their laws.
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March 30, 2014, 09:14:58 PM
 #16

...
Look at what happened with online poker a decade ago. Government got involved, seized bank accounts, forbid banks from doing business with online gambling sites, etc etc.

They didn't have to go after individuals to cripple something, they go after the big institutions.

So for bitcoin, if they want individuals to comply with laws, they could set up an agency where you have to register your bitcoin addresses with (and possibly give them access to freeze/seize your funds if they deem necessary). If you don't have a valid registration with that agency, banks will not allow you to do any transactions related to bitcoin (eg, wire transfer to an exchange). The government would use the banking system to enforce their laws.

That would probably make both governments and banks both unpopular and unsuccessful.
Big institutions are a no-no in the bitcoin sphere. Something a lot of people doesn't seem to get.
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March 30, 2014, 09:32:24 PM
 #17

...
but you can bet that major businesses will be complying. Without major businesses accepting it, it can't go mainstream and it'll just be a drug trader currency.

Look at what happened with online poker a decade ago. Government got involved, seized bank accounts, forbid banks from doing business with online gambling sites, etc etc.

They didn't have to go after individuals to cripple something, they go after the big institutions.


The natural solution seems to me to be keep Bitcoin away from:

 - Large institutions which can be pressured

 - A large fraction of individual users who simply don't have an never will have the ability to manage their sensitive data.  They have caused the system more damage so far than probably any other factor in my opinion, and I cannot see it getting any better.

At first blush this may seem limiting, but it's a big world so even the relatively small fraction of people who have the native ability to deal with Bitcoin constitute a decent userbase.  By the same argument, there are a lot of niches where Bitcoin works extremely well and will be leveraged.  My hope is that a primary one of these niches will be as backing for a plethora of purpose tuned 'second tier' or 'off-chain' solutions.

I contend that the potential 'market cap' for Bitcoin is enourmous even if 'mainstream' use is cut out, especially since there would evolve plenty of 'mainstream' use by proxy.

So for bitcoin, if they want individuals to comply with laws, they could set up an agency where you have to register your bitcoin addresses with (and possibly give them access to freeze/seize your funds if they deem necessary). If you don't have a valid registration with that agency, banks will not allow you to do any transactions related to bitcoin (eg, wire transfer to an exchange). The government would use the banking system to enforce their laws.

If black/red-listing (aka, tainting) can be arranged in a way which is even a little bit credible, I believe that it would open the door for such registration.  This because large institutions (Google/Facebook, Overstock/TigerDirect, etc) can be forced to honor it and it will rapidly create fungibility problems for everybody.  And also, of course, that forced registration would in and of itself change the nature of Bitcoin beyond recognition.


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March 30, 2014, 09:37:53 PM
 #18

That would probably make both governments and banks both unpopular and unsuccessful.
Big institutions are a no-no in the bitcoin sphere. Something a lot of people doesn't seem to get.

To put things in perspective:

The market cap of bitcoin is currently $5.7 billion.
The market cap of Apple is $579 billion.
The monetary base of the USD is estimated to be $3 trillion ($3000 billion)
The M1 of USD is estimated to be $10 trillion.

Currently, bitcoin is a very small thing in the institutional finance world.   I believe things will change.
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March 30, 2014, 09:40:35 PM
 #19

...
Look at what happened with online poker a decade ago. Government got involved, seized bank accounts, forbid banks from doing business with online gambling sites, etc etc.

They didn't have to go after individuals to cripple something, they go after the big institutions.

So for bitcoin, if they want individuals to comply with laws, they could set up an agency where you have to register your bitcoin addresses with (and possibly give them access to freeze/seize your funds if they deem necessary). If you don't have a valid registration with that agency, banks will not allow you to do any transactions related to bitcoin (eg, wire transfer to an exchange). The government would use the banking system to enforce their laws.

That would probably make both governments and banks both unpopular and unsuccessful.
Big institutions are a no-no in the bitcoin sphere. Something a lot of people doesn't seem to get.

The US Govt and the US banking system is incredibly unpopular. Look at the crappy congress approval ratings, and how many people are angry about what wall street and the big banks did. But they're very successful. The US Govt is still in power, and the US Banking system still has control over the economy.

Big institutions are already in the bitcoin sphere. What do you call CEX.io who has 1/4 of the network hash power? What do you call bitstamp and the other big exchanges that handle the bulk of trading volume? They have huge influence over the bitcoin economy.

If black/red-listing (aka, tainting) can be arranged in a way which is even a little bit credible, I believe that it would open the door for such registration.  This because large institutions (Google/Facebook, Overstock/TigerDirect, etc) can be forced to honor it and it will rapidly create fungibility problems for everybody.  And also, of course, that forced registration would in and of itself change the nature of Bitcoin beyond recognition.

That's not what I was getting at though. Forcing people to register/provide access to their wallets to a govt agency makes it possible for the govt to seize your coins.
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March 30, 2014, 09:53:35 PM
 #20

If black/red-listing (aka, tainting) can be arranged in a way which is even a little bit credible, I believe that it would open the door for such registration.  This because large institutions (Google/Facebook, Overstock/TigerDirect, etc) can be forced to honor it and it will rapidly create fungibility problems for everybody.  And also, of course, that forced registration would in and of itself change the nature of Bitcoin beyond recognition.

That's not what I was getting at though. Forcing people to register/provide access to their wallets to a govt agency makes it possible for the govt to seize your coins.

The converse seems much more likely to me.  That is, the ability to seize ones coins produces the ability to force registration.  The difference between seizing and devaluing is minimal if the devaluation is significant, and I think that the impacts of tainting may be more effective in this than most people imagine.

There is no real reason for the government to even wish to seize people's BTC.  They have as much funding as they need under the current system where they basically pull it out of thin air.  The plebs are prone to trade assets away in exchange for peanuts within a few months of obtaining it anyway...and the peanut vendors are the ones who the government caters to.

The thing which is of extreme value to understand who is doing what with what resources.  That is why I expect that there will be a strong and growing interest in correlating individuals to transactions. [edit->] And that will be the driving force behind registration(s).


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