What if non-custodial crypto is made "illegal" by mainstream governments?

[Abiky]

Let's say governments decide to ban all non-custodial crypto transactions, in a bid to force everyone to rely on centralized exchanges and/or centralized wallet services. They would keep coins under their "control", although that won't stop someone from performing non-custodial crypto transactions "under the radar". Still, there would be the risk of getting caught and face fines and/or imprisonment.

Do you think governments will go to such lenghts in the future? If not, why? Your input would be greatly appreciated. Thanks.

[MAAManda]

Let's say governments decide to ban all non-custodial crypto transactions, in a bid to force everyone to rely on centralized exchanges and/or centralized wallet services. They would keep coins under their "control", although that won't stop someone from performing non-custodial crypto transactions "under the radar". Still, there would be the risk of getting caught and face fines and/or imprisonment.

Do you think governments will go to such lenghts in the future? If not, why? Your input would be greatly appreciated. Thanks.

I don't think governments will go that far, mate. Forcing adopters to use off-chain transactions through centralized platforms is impossible IMO. After all, they wouldn't fully benefit from forcing off-chain transactions. Look at how DeFi works, it happens on-chain, if they completely ban on-chain transactions, they will stifle innovation.

[Charles-Tim]

We do not know the future, but anything is possible.

I think the government can not go up to such length. The extent they can go has been seen by us, the laws which is existing in UK and EU about people to declare their noncustodial addresses.

If a government is telling its citizens to only make use of custodial wallets and exchanges, that is a big problem to their citizens freedom.

[PrivacyG]

My opinion is this,

They are going to make things very difficult for people who are public about their Cryptocurrency use and do not want to share with the authorities or institutions what they do with their Cryptocurrencies.  The European Union is planning to crack down on anything closer to anonymity next year.  They will first do this for service providers but I doubt this is not a precedent to then make everyone comply with the same rules.  Because if most people comply with the service provider rules, few will not and these will be 'question marks' for governments.  Perfect excuse to make it a general rule, because why are few people 'hiding' now when everybody else is not, right?

I wonder how that goes and if they will actually do it, although I doubt they will not.

Us who want freedom will move under the ground at some point.  It is what they are forcing us to do and I will do it simply because I do not want to be part of the future dystopian notion of 'freedom' where you must be afraid of sitting behind curtains because 'what if?'.  If they want to imprison me for wanting to be free, like I said before, this means prison will sound better than the 'freedom' of waking around the world tracked down at every move and having to explain every thing you do with your life.

[nelson4lov]

They can do such if they want but what they can't take away is p2p. People can always do peer to peer transactions and exchange bitcoin <> local currency and government wouldn't know what the transaction was for or even tag it as a crypto transaction. It's something that is within their power to implement but right now, it is more +EV for them not to do so.

[TastyChillySauce00]

Do you think governments will go to such lenghts in the future? If not, why? Your input would be greatly appreciated. Thanks.

Right to self custody is a thing and I doubt government will pursue that far. If they are making self custody illegal, it will be so wrong on so many levels.
Their domain of enforcing qualified custodial should only be limited to protect public's funds and investors' interest in an institutional level. Should never be going as far as preventing people from self custody.

[rat03gopoh]

Does that mean they won't allow anyone to transact on-chain and will outright ban anyone from using cryptographic keys (private/pub keys), including regulated companies? In that case, they're essentially banning the entire industry. While this is nearly impossible, if they insist, prisons will most likely be the place where people who want freedom reside.

[Kavelj22]

Do you think governments will go to such lenghts in the future? If not, why? Your input would be greatly appreciated. Thanks.

This is unlikely to happen despite it is a possible scenario. We all know that governments can apply such an extreme criminalization which will lead to everybody stop using privacy transactions because of fear from accountability. However, this won't happen at any time sooner or later because this means killing the cryptocurrency sector as a whole. Think about governments everywhere fighting a specific product with laws and legislations, what should happen? The fight won't just include ordinary users, but also apps and services in the sector.

Government might invite people to use their alternatives like we saw with the CBDC initiative. But it won't forbid the use of the blockchain as a concept whatever how much their power is.

[Iamgoat]

We do not know the future, but anything is possible.

I think the government can not go up to such length. The extent they can go has been seen by us, the laws which is existing in UK and EU about people to declare their noncustodial addresses.

If a government is telling its citizens to only make use of custodial wallets and exchanges, that is a big problem to their citizens freedom.

But how realistic is such announcement which says you must declare your custodial wallet and what if I have such wallets and decide not to declare mine because I think it will make me exposed my own worth to the government because if they government is saying we should declare our noncustodial wallet I also think they are saying you should declare whatever savings I have and my net worth. this also makes me want to ask whether such noncustodial wallets whose assets have been asked to be declared whether they will be taxable or not and if yes then it means the government already in a way controls the funds which get in there and out just by knowing how to tax the funds which are recieved by those wallets making it of disadvantage.

[Felicity_Tide]

~snip

Do you think governments will go to such lenghts in the future? If not, why? Your input would be greatly appreciated. Thanks.

I believe the government can go any length to achieve what they want.
The whole idea might look clearly impossible, until they just figure out a way to do it all of a sudden. It has always been their desire to keep the people under them_{(their surveillance)}, and the finance of the people is not an exception either.  We just don't know what to expect yet, considering the fact that the introduction of Cex was literally a success that automatically kept a lot of people in check_{(under their surveillance)}. If the government is thirsty for more, I think they might strive for other means, but I doubt they're thinking about that at the moment... Not sure though.

[Abiky]

We do not know the future, but anything is possible.

I think the government can not go up to such length. The extent they can go has been seen by us, the laws which is existing in UK and EU about people to declare their noncustodial addresses.

If a government is telling its citizens to only make use of custodial wallets and exchanges, that is a big problem to their citizens freedom.

Isn't declaring your non-custodial addresses the beginning of government overreach? They will start with this, until they find an excuse to render it "illegal" from mainstream use. Besides, what guarantee will the government have you will provide all of your non-custodial addresses? What if you give the government a select few number of addresses, while not disclosing those tied to your utmost-sensitive financial info? Unless you send coins from the non-custodial address to a centralized exchange, there would be no way to find out.

But of course, governments always find a way to get what they want. So, I wouldn't be surprised if they go to great lengths in the future. Better be prepared for the worst, I guess. We'll see what happens...

[Emitdama]

Let's say governments decide to ban all non-custodial crypto transactions, in a bid to force everyone to rely on centralized exchanges and/or centralized wallet services. They would keep coins under their "control", although that won't stop someone from performing non-custodial crypto transactions "under the radar". Still, there would be the risk of getting caught and face fines and/or imprisonment.

BTC should be an example of non-custodial crypto and in fact, BTC had been banned already by many governments. Even up to now, the ban on BTC is still effective on some country. It is possible though.

By the way, the title only says non-custodial crypto but it is all about all non-custodial crypto transactions as well as you mention in your open post. Even though it may still be negative but it was not bad as the other ban, because that means that we still can continue using Bitcoin, although only in a custodial way or in a centralized manner, right?

I don't think governments will go such a length anymore. They even allow Bitcoin now for what it is.

[Johnlomape]

The government can do anything they want especially when new government emerge that don't like cryptocurrency to exist without strict measures to check transactions and know which ones are illegal. Anything can happen although we should not pray for this kind of reaction from the government where it will be hard to make transactions anonymously to any wallet you prefer.
The government can become brutal if their are several reported cases of money laundering increasing and using cryptocurrency to bypass their illegal transactions so that they will be hard to track.

[Conqueror777]

Let's say governments decide to ban all non-custodial crypto transactions, in a bid to force everyone to rely on centralized exchanges and/or centralized wallet services. They would keep coins under their "control", although that won't stop someone from performing non-custodial crypto transactions "under the radar". Still, there would be the risk of getting caught and face fines and/or imprisonment.

Do you think governments will go to such lenghts in the future? If not, why? Your input would be greatly appreciated. Thanks.

I can't predict the future since I don't have a crystal ball, but most of the European goverments right now require at least to know wether you own cryptocurrency on your wallets/crypto exchanges. I think the next step would be to tax everyone based on their profits and after that they would probably ban people who use non-custodial crypto transactions.

[o48o]

Let's say governments decide to ban all non-custodial crypto transactions, in a bid to force everyone to rely on centralized exchanges and/or centralized wallet services. They would keep coins under their "control", although that won't stop someone from performing non-custodial crypto transactions "under the radar". Still, there would be the risk of getting caught and face fines and/or imprisonment.

Do you think governments will go to such lenghts in the future? If not, why? Your input would be greatly appreciated. Thanks.

Why would it need to be illegal if they can tax it? I am guessing that some authoritarian governments will make or keep it illegal, but that's not really the most effective road they could take.

Most first world governments are build from their people, and it's not their interest to go against their people if those people can vote them out of their jobs. And it's not only normal citizens that own cryptos. It's institutions and some law makers as well. So it would be hard to form a consensus where they would just all go against all cryptos. That just doesn't make any sense, and it would be near impossible to outlaw some open source protocols.

What they CAN do is tax the hell out of them, or ban some of them from cexes, and if there's no credible / provable money trail, they can just freeze CEX and bank accounts and money in them. Which they are already doing.

[jossiel]

Let's think that every possibility is there. We've seen how far the governments can do like for the privacy coins getting chased by them.

How much more with these transactions, exchanges and even crypto. They can demand, declare and make policies that shall favor them.

Depending on the reasoning that they'll apply why they have to do it. So if it's the chances, don't remove that chances for them because they can make it happen if they have to.

[PrivacyG]

Why would it need to be illegal if they can tax it? I am guessing that some authoritarian governments will make or keep it illegal, but that's not really the most effective road they could take.

It is in a way.  They are already taxing it.  If they make non custodial use illegal, how many people does it really affect?  Most people who join any Cryptocurrency are first losing a ton of money before finally realizing which ones are worth holding and start recovering their losses first and then finally making a profit.  Whether they make a profit or lose, this all happens on a Know Your Customer centralized exchange account most of the time.  I highly doubt this would cause any large trouble such as large protests or revolt.

It may at first, do not get me wrong, I totally believe there MAY be a little bit of upset and frustration.  But just a little.  And people like me who care about privacy are already used to privacy things becoming illegal or 'grey' all of a sudden.  We almost got used to ignore such news as they are not new to us.  So if we are not vocal, who will be?  The people who are losing a lot of money in shit coins?  The handful of people who are going to really protest for their 'rights to financial freedom'?  The over 90 percent rest would laugh in their face and move on purchasing the next Meme coin to be hyped again.

Your described scenario is in my opinion one of the best ways this can go.  If people would be upset enough by a Bitcoin non custodial ban that they would consider it 'the government turning against its own citizens' then it means we are actually on a GREAT path as a society.  In my opinion, this is very far away from the truth and most people would not care after a week or two.  Law makers holding Bitcoin would not be affected by a 'non custodial ban' in any way.  Are they not even required to publicly list their Bitcoin wealth in some countries if they are working in a public institution?

Anyway.  Your argument could fall short right away.  Bitcoin is legal already.  It is taxed already.  The 'non custodial' part of it is particularly the one they can call out on not being taxed particularly due to its uncontrollable nature.  A 'non custodial ban' would fix that and make all Bitcoin taxable while making any non taxable Bitcoin illegal as it is 'caused by people not wanting to be sincere and file their profits'.

[Taskford]

Let's think that every possibility is there. We've seen how far the governments can do like for the privacy coins getting chased by them.

How much more with these transactions, exchanges and even crypto. They can demand, declare and make policies that shall favor them.

Depending on the reasoning that they'll apply why they have to do it. So if it's the chances, don't remove that chances for them because they can make it happen if they have to.

Look at this situation happened last year on which privacy coins has been banned or attacked certain countries https://stateofsurveillance.org/articles/government/privacy-coins-regulatory-war

Many people didn't expect that certain situation like that will exist, but it happens.

So those situations you have said also have possibilities to happen, since government seems dislike the idea of privacy and they always want to have control.

[coin-investor]

Do you think governments will go to such lenghts in the future? If not, why? Your input would be greatly appreciated. Thanks.

It's possible we have seen our government trying to warn about the use of DEX; it's just a warning disguised as an attempt to protect its citizens, but the local community saw this as an indication of what they are planning to do.
It's a major threat to privacy, but stakeholders will lobby against or combat it.
We don't complain if they want to tax us or choose where we trade, but we will never allow them to choose the wallet we use.

[Webetcoins]

Look at this situation happened last year on which privacy coins has been banned or attacked certain countries https://stateofsurveillance.org/articles/government/privacy-coins-regulatory-war

Many people didn't expect that certain situation like that will exist, but it happens.

So those situations you have said also have possibilities to happen, since government seems dislike the idea of privacy and they always want to have control.

There is a difference between non-custodial wallets and privacy coins, but yeah I do understand your point. While it is quite possible for countries to ban non-custodial wallets, it is not going to be the same chance.

Think about it this way, privacy coins means that you have no idea where the money came from and where it is going or even where it is right now.

This is of course great for people who commit crimes, could be drug dealers, could be anyone, and because of this, it was banned. Non-custodial would not be banned for this reason, but it could of course be banned for many reasons.