What if receiving payments in bitcoins is made illegal?

[robm]

I'm a finance writer and I think bitcoin is one of the most interesting ideas I've come across for a long time (I usually concentrate on gold when it comes to avoiding fiat currencies). I don't for a minute pretend to understand the technology behind this. But assuming that it is sound, so far so good. The world would benefit from free market currency or currencies, and even had them until quite recently.

But there one potential flaw to bitcoin that springs to mind. Governments may not be able to control the supply of bitcoins, but they may be able to control their use.

So if you want to buy a good or service in any country, that country may make it illegal for a business to receive payment in bitcoins. Worse, many countries may collaborate to make it illegal across large parts of the world. So legitimate businesses, that would usually accept payment in bitcoins, would be forced to stop or face potentially severe penalties (fines, jail sentences, removal of licences or whatever).

One way around this would be for some kind of offshore exchange where you could convert your bitcoins back into dollars or whatever. Then bring them onshore to make payments. But then the privacy would be lost (cross border banking is monitored). Also these "bitcoin havens" would probably have similar pressures put on them as the offshore tax havens. For example, regulators could just say that the bitcoin system is open to money laundering (organised crime, drugs) and/or is a way to finance terrorism (as with efforts to clamp down on the traditional hawala money payments system in the Arab world after 9/11).

So if bitcoins end up being severely restricted as a form of payment for useful goods and services, I wonder if they would keep any value at all. Ultimately money has to be easily exchangeable into something you can use (goods, services, houses).

Has anyone got any thoughts on this? I'm new to bitcoin, so I'm sure many of you have been through this kind of thing before. Would love to hear your ideas.

Thanks

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[BitterTea]

I think it will be some time before any government tries to outright ban the use of Bitcoin, if at all. By the time that happens, I think it will have little effect, just as attempts to prevent use of bittorrent have had little effect.

[tomcollins]

Governments are a huge potential threat to BitCoin.  If your legitimate business can be shut down for accepting Bitcoins, they certainly can harm you.  Unless you are able to have a transaction where they couldn't shut you down of course.

The value would be much lower if they are banned in places, and much higher if use is widespread.  Most people will obey their governments, so it would certainly lower the usage, and lower their value.

[tomcollins]

I think it will be some time before any government tries to outright ban the use of Bitcoin, if at all. By the time that happens, I think it will have little effect, just as attempts to prevent use of bittorrent have had little effect.

Torrents are not illegal, just certain content is illegal to share.  But if you were selling torrent files in a store, you can bet your ass you would get shut down quickly.

This is why the torrent sites are located in places that are more friendly.  If you can sell things without being able to be identified, yeah, they will have a harder time.

[Sedo]

I think it will be some time before any government tries to outright ban the use of Bitcoin, if at all. By the time that happens, I think it will have little effect, just as attempts to prevent use of bittorrent have had little effect.

You can not fully compare Bitcoin to Bittorrent. A Bittorrent user that downloads a torrent from the newest episode of his favorite TV series on his backroom computer is something different than a business, that publicly announces, that it accepts BTC.

[tomcollins]

I think it will be some time before any government tries to outright ban the use of Bitcoin, if at all. By the time that happens, I think it will have little effect, just as attempts to prevent use of bittorrent have had little effect.

You can not fully compare Bitcoin to Bittorrent. A Bittorrent user that downloads a torrent from the newest episode of his favorite TV series on his backroom computer is something different than a business, that publicly announces, that it accepts BTC.

No WAI!  GOVERNMENT STUPID, BITCOINS USERS SMART!  WE WILL DESTROY THEM!

[Timo Y]

The major potential I see for Bitcoin are not so much large retailers but small entrepreneurs, freelancers, and the grey market, especially in developing countries where a lot of trade happens off the radar anyhow. Even in richer countries like Italy there is a huge underground economy that the government struggles to tax or regulate.  

It is going to be almost impossible to enforce a Bitcoin ban in this sector. That would be even harder than trying to enforce a ban on cash!

Many of the slums in the world's megacities are a cash-only economy, because a lot of slum dwellers don't even have documents, let alone a bank account.  This isn't a small economy though.  In 3-5 years time every favelado in Rio is going to own a smartphone.  Imagine what an improvement Bitcoin would offer for them compared to cash.  When the Brazilian government  struggles to keep the armed gangs under control, do you really think that enforcing a Bitcoin ban is going to be high on its list of priorities? They've got other things to worry about!
 

Anyhow, I think it's unlikely that Bitcoin will be banned outright in the West. What we are more likely to see are attempts to regulate it, and prosecution of individual users rather than the network as a whole.  

See the history of bittorrent for an analogy.

[marcus_of_augustus]

The govt. would not ban bitcoin commerce without a very good pretext in place first. Govt.s acting arbitrarily against seemingly peaceful activities can get voted out in an awful hurry ... they need a good reason to ban it or else they just look like petty tyrants ... perception is everything.

If/wehn they do ban all trades in bitcoin then another better block chain will have already started, call it bytecoin ... will they ban that too? What will they legally allow and not allow, some things like IPv4 address trading may get caught up in the ban if the wording is not perfect.

It is a legal minefield and would drag govt.s into courts for years trying to figure of out fine distinctions in crypto-technology that politicians have no clue about.

In the mean time crypto has figured a work around whatever is the rule-of-the-day coming form the central-planners of crap fiat money and the game goes on.

They will exhaust themselves chopping heads off the hydra ... good luck to them, it is the greatest trojan attack ever. If they engage they are fucked, if the adopt it they are fucked because the hard monetary standard will only support the most minimal of state structures.

[Timo Y]

It is a legal minefield and would drag govt.s into courts for years trying to figure of out fine distinctions in crypto-technology that politicians have no clue about.

Change in the legal system happens very very slowly, and the internet moves lightning fast. It will take politicians and judges years to even get their head around what a p2p cryptocurrency is in the first place, and by that time their 10-year old daughters will be using Bitcoin as in-game currency for MMOGs.

[abc123]

The major potential I see for Bitcoin are not so much large retailers but small entrepreneurs, freelancers, and the grey market, especially in developing countries where a lot of trade happens off the radar anyhow. Even in richer countries like Italy there is a huge underground economy that the government struggles to tax or regulate.  

It is going to be almost impossible to enforce a Bitcoin ban in this sector. That would be even harder than trying to enforce a ban on cash!

Many of the slums in the world's megacities are a cash-only economy, because a lot of slum dwellers don't even have documents, let alone a bank account.  This isn't a small economy though.  In 3-5 years time every favelado in Rio is going to own a smartphone.  Imagine what an improvement Bitcoin would offer for them compared to cash.  When the Brazilian government  struggles to keep the armed gangs under control, do you really think that enforcing a Bitcoin ban is going to be high on its list of priorities? They've got other things to worry about!

True, but imagine holding onto a currency that you can't spend in your own country. Seems kind of pointless, doesn't it?

[tryptamine]

Govt.s acting arbitrarily against seemingly peaceful activities can get voted out in an awful hurry ... they need a good reason to ban it or else they just look like petty tyrants ... perception is everything.

Let's play the role of the government:

"Bitcoin is used to pay for drugs, weapons and child porn"

There you go, the government saving the stupid people from themselves, again.

[Timo Y]

True, but imagine holding onto a currency that you can't spend in your own country. Seems kind of pointless, doesn't it?

Not necessarily. Most Swiss Francs in circulation are held by people who don't live in Switzerland.  Same could happen to BTC if it's perceived as an currency that won't lose its value.

[marcus_of_augustus]

The major potential I see for Bitcoin are not so much large retailers but small entrepreneurs, freelancers, and the grey market, especially in developing countries where a lot of trade happens off the radar anyhow. Even in richer countries like Italy there is a huge underground economy that the government struggles to tax or regulate.  

It is going to be almost impossible to enforce a Bitcoin ban in this sector. That would be even harder than trying to enforce a ban on cash!

Many of the slums in the world's megacities are a cash-only economy, because a lot of slum dwellers don't even have documents, let alone a bank account.  This isn't a small economy though.  In 3-5 years time every favelado in Rio is going to own a smartphone.  Imagine what an improvement Bitcoin would offer for them compared to cash.  When the Brazilian government  struggles to keep the armed gangs under control, do you really think that enforcing a Bitcoin ban is going to be high on its list of priorities? They've got other things to worry about!

True, but imagine holding onto a currency that you can't spend in your own country. Seems kind of pointless, doesn't it?

You haven't exactly spelt how they would physically stop someone spending it "in their own country".

They can ban it, like all you statists are drooling about, but what would that mean if everyone ignored it because they know it is uneforceable ... laws like that delegitimizes their authority, and anarchy follows after that.

[thisisharsh]

There are some basic human rights issues with banning bitcoins for trade.  It would be equivalent of banning bartering.

I could imagine 'soft' measures to discourage it, however, using the excuse of money laundering, purchase of illegal goods, and 'cash in hand' work for tax avoidance.  

So attempts at monitoring and investigating bitcoin transactions will almost definitely happen, though to what extent is the real question.  It may be that when you have a legitimate reason for trading large volumes of bitcoin you will have to register yourself with an official body and submit to audits, or risk investigation and possible prosecution.

[eMansipater]

As someone looking to build legitimate business on BitCoin, this is something I've thought quite a bit about.  The answer seems to be that there are good arguments to convince governments not to do this.  As noted in the first serious article about BitCoin money-laundering concerns, nothing prevents a well-funded criminal organisation from launching their own version of BitCoin and completely ignoring any outside authorities.  Removing the possibility for legitimate businesses to deal in bitcoins will simply drive the system underground instead of providing the wide range of warrant-accessible information that results from the practice of legitimate business.

BitCoin is best understood not as a threat itself, but as the discovery of a mathematical possibility that has always existed.  Given that this is the case, I believe forward-thinking policymakers should take advantage of the opportunity to support an above-board counterpart to darker possibilities.  The BitCoin community as it currently exists is open-source, transparent, and intentionally accessible--not features you'd find in a criminal cartel's version, but very hopeful ones for those looking to protect society from malevolent actions.  It does require a shift in mentality and approach, but the time to make that shift is now.  Certain types of information, sometimes more than is available with cash, can be gained from blockchain and network analysis.  But the key to stopping criminal action via BitCoin is the same approach that applies to credit card and PayPal fraud as well as any type of money laundering:

• honeypots
• social infiltration
• tracking of physical goods, especially those that defy declared income, and
• implementing strong trust mechanisms

Over a decade ago I was saying that major players in the media industry should build their own file-sharing networks:  at the time I was laughed at but we now know that the branding and positioning potential of that move would have been huge.  Just look at YouTube's successful play in the online video space to see how that might have gone down.  The only way to have any say in the shape of our digital tomorrow is to supply a part of it yourself--the first country who embraces digital currency as not just uncontainable but an innovation-enabler will probably be the superpower of tomorrow.

Just my .02 btc on the topic--I'd be happy to explain the underlying technology of BitCoin to you in plain language, or offer you a quote if you're planning to write something.


p.s.  Those of you who are filling up the thread with your personal hobby horses aren't being very helpful.  These forums are getting too swamped for every thread to get hijacked like this--try to take a little time and think through a careful response to the OP.

[abc123]

True, but imagine holding onto a currency that you can't spend in your own country. Seems kind of pointless, doesn't it?

You haven't exactly spelt how they would physically stop someone spending it "in their own country".

They can ban it, like all you statists are drooling about, but what would that mean if everyone ignored it because they know it is uneforceable ... laws like that delegitimizes their authority, and anarchy follows after that.

They can't stop people from trading it, but they can stop businesses from advertising that they accept it. They can also run sting operations to catch people. If it was banned it would become a cat and mouse game, like with any other contraband.

[marcus_of_augustus]

p.s.  Those of you who are filling up the thread with your personal hobby horses aren't being very helpful.  These forums are getting too swamped for every thread to get hijacked like this--try to take a little time and think through a careful response to the OP.

Pretty hypocritical don't you think, seeing as your post is the longest with perhaps the largest baggage agenda (statist bitcoin adoption) of anyone who has posted on the thread?

Mirror, you, look.

It is just another example of a noob asking a provocative question, why would he assume it will be made illegal?

It is like someone just invented a new browser (al gore) and the first question the noob asks is "what if they made that illegal?

The asking of the question is more instructive of the wider society's statist mindest surrounding financial affairs that the banksters have brain-washed everybody into. It is a ridiculous question asked by slaves to the current facist financial-political structure.

[eMansipater]

@robm You can ignore him.

[abc123]

The asking of the question is more instructive of the wider society's statist mindest surrounding financial affairs that the banksters have brain-washed everybody into. It is a ridiculous question asked by slaves to the current facist financial-political structure.

Isn't it an oxymoron to call the current financial-political structure fascist and yet state it is ridiculous question to ask whether bitcoin might be made illegal?

[mewantsbitcoins]

Here's a better question:

What if we make governments illegal?