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Author Topic: What happens if the US bans the use of bitcoins?  (Read 7796 times)
SgtSpike
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May 16, 2011, 06:30:10 PM
 #1

I think it's inevitable.  Even if it largely unenforceable, I believe the US will ban the use of bitcoins as a currency.

The effects of this:
- Current bitcoin-to-cash and cash-to-bitcoin services will be shut down.  No one could continue to operate a decently large service like that and not be caught.
- A black market might form for bitcoin-to-cash and cash-to-bitcoin services, which specializes in avoiding the government's watchful eye.  I am not sure how they would be able to do it, but I would bet it would involve piles of laundered drug money that is currently invisible to the government.
- Bitcoin value would drop like a rock overnight.  Without anyone being able to exchange bitcoins for USD, many investors/speculators would lose confidence and try to sell sell sell as quickly as possible to avoid being stuck with bitcoins they cannot use (read: cannot continue investing with).  Investors/speculators don't want to buy stuff with bitcoins, they are only in it for what they can get out of it in USD.
- Many people would still see the value of bitcoins as a currency, and would not join in the panic sell - they would hold on to their bitcoins and wait to see what happens.
- Pricing of goods and services in bitcoins would suddenly become extremely arbitrary, with no USD exchange rate to compare prices to.
- Eventually, bitcoins would see stability again, albeit at a much lower market value.  Trades of bitcoins for goods and services would start happening again at a regular rate.  Pricing for goods would still be semi-arbitrary for quite a while, with fluctuations depending on the seller's belief/trust in bitcoins.  Lower trust in bitcoins = higher price for goods.  Buyers would be mostly willing to accept whatever the current lowest price is for the good or service they are looking for.
- The cost to mine bitcoins within a certain period of time may come in to play with regards to the ending "stable" market value of bitcoins, and thus, the saleprice of many goods and services.

Discuss.
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May 16, 2011, 06:38:02 PM
 #2

- Current bitcoin-to-cash and cash-to-bitcoin services will be shut down.  No one could continue to operate a decently large service like that and not be caught.
Only those in the US. I mean, the US has banned Internet poker as well, but half of the world is still doing it. I'm not sure how many of the services are actually based in the US.
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- Bitcoin value would drop like a rock overnight.  Without anyone being able to exchange bitcoins for USD, many investors/speculators would lose confidence and try to sell sell sell as quickly as possible to avoid being stuck with bitcoins they cannot use (read: cannot continue investing with).  Investors/speculators don't want to buy stuff with bitcoins, they are only in it for what they can get out of it in USD.
Or the price might increase, because they have an illegality/danger-premium, like drugs.

It's hard to predict in advance.

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May 16, 2011, 06:39:47 PM
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I’m not located in the US.

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May 16, 2011, 07:18:41 PM
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Total guess, and not even really what I think would happen. But lets say US gov squeezes out 50% of US users. Not only is this going to be <10% of worldwide users, but panic selling will we gladly embraced by the unaffected users and the drop will not be so substantial.

Another thing to consider is that once there is a booming internal economy the entrance and exit aren't so important.

Compared to the US poker shutdown it would be like if there was no way to deposit or withdraw poker money, but we could still play, buy things with it, and transfer to friends and clients. It would suck, but it wouldn't kill it it would just make it a little less convenient.

And since it makes it less convenient to get back to dollars some people would just keep coins and find coin merchants instead of converting and using a dollar merchant they used to like. Say I have my revenue 50% in coins and dollar conversions get banned. Now instead of converting all the time since it is hard I do all my grocery shopping I can from bitmunchies and use a newegg proxy for all my electronics etc etc. Of course there will just be tons of merchants by this time so it won't be that hard. If 100% of my income was coins I'd establish a relationship and maybe pay a premium to get money out for rent and parking tickets. That or move to a free(r) country :-)

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May 16, 2011, 07:38:51 PM
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To answer this question I'd have to know what would happen to the bitcoins already held by Americans.

A ban with no "teeth"---one that could be enforced only ineffectively---might actually have the greatest negative effect on the value of bitcoins. American businesses would have to shut down or at least relocate at great expense, resulting in a massive decrease of value in the Bitcoin economy. Americans who anticipated their bitcoins becoming worse than useless would be willing to sell them at any price. I wouldn't be surprised to see a 99% decrease in value within an hour of the announcement, if it came as a complete surprise.

On the other hand, if the US government were somehow able to disconnect Americans from the bitcoin network---perhaps by requiring ISPs to monitor their traffic, or something---most American-held bitcoins would disappear from circulation. This sudden decrease in supply might be enough to counteract the loss of American economic activity. So there could be very little change at all.

As much as many folks here hate the idea of "cooperating" with governments, I think it's important to get some state recognition so that banning Bitcoin becomes politically complicated. Some folks have suggested that some failed economy like that of Zimbabwe might adopt the bitcoin as a peg. If they did so, banning bitcoins would amount to banning trade with Zimbabwe, and have all sorts of foreign-relation implications. I can't see even the USA doing something like that lightly.

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May 16, 2011, 07:51:11 PM
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Americans who anticipated their bitcoins becoming worse than useless would be willing to sell them at any price. I wouldn't be surprised to see a 99% decrease in value within an hour of the announcement, if it came as a complete surprise.
 

No way. There is a lot more world than the US. You think people in Canada, Denmark and Indonesia who thought they missed the bitcoin boat won't jump at the chance to get them at half price? I'm in the US and I'm a buyer on that day if I can get them at 50% of the day before.

Even if everyone in the US obeyed and stopped using bitcoins there is no way price goes to 1%.

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May 16, 2011, 07:53:35 PM
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No way. There is a lot more world than the US. You think people in Canada, Denmark and Indonesia who thought they missed the bitcoin boat won't jump at the chance to get them at half price? I'm in the US and I'm a buyer on that day if I can get them at 50% of the day before.

Even if everyone in the US obeyed and stopped using bitcoins there is no way price goes to 1%.

That's a rather naive assumption. If half of the world demanding bitcoin is the US, the economy is going to drop by half.

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May 16, 2011, 08:29:58 PM
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No way. There is a lot more world than the US. You think people in Canada, Denmark and Indonesia who thought they missed the bitcoin boat won't jump at the chance to get them at half price? I'm in the US and I'm a buyer on that day if I can get them at 50% of the day before.

Even if everyone in the US obeyed and stopped using bitcoins there is no way price goes to 1%.

That's a rather naive assumption. If half of the world demanding bitcoin is the US, the economy is going to drop by half.

A bit more.  Not only do you have the lack of demand from buyers in the US, it would decrease the usefulness of the currency by some factor as well.

It might be said that each new user increases the value of Bitcoin by greater than 1/n up to a certain point.
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May 16, 2011, 08:53:58 PM
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No way. There is a lot more world than the US. You think people in Canada, Denmark and Indonesia who thought they missed the bitcoin boat won't jump at the chance to get them at half price? I'm in the US and I'm a buyer on that day if I can get them at 50% of the day before.

Even if everyone in the US obeyed and stopped using bitcoins there is no way price goes to 1%.

That's a rather naive assumption. If half of the world demanding bitcoin is the US, the economy is going to drop by half.

A bit more.  Not only do you have the lack of demand from buyers in the US, it would decrease the usefulness of the currency by some factor as well.

It might be said that each new user increases the value of Bitcoin by greater than 1/n up to a certain point.

This is true.

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May 16, 2011, 09:04:57 PM
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I never cease to be amazed by the pathological American arrogance, and  the view that the world will in all aspects continue to revolve around "The US" in this century, just as it did in the last one!  Cheesy

It's a country that comprises 4% of the world population, is broke and in debt as far as one can predict into the future, is on the verge of fiscal collapse as predicted by its own politicians and their commissions, and whose currency is  also likely to collapse within this decade...

When USD does collapse, there will be no place for Americans to run, except ahead to things like Bitcoin and its clones, and backwards to gold and other such juju beads... Cheesy

Even if "The US" bans such things as Bitcoin in its usual arrogance by declaring it part of "The War on Terrorism and Drugs" or something, i think that in the vast majority of the world - or as the Americans call it "the rest of the world" - Bitcoin will continue to do well...  Wink

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May 16, 2011, 09:11:11 PM
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the U.S. will ban hugging in public soon
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May 16, 2011, 10:01:08 PM
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Even if "The US" bans such things as Bitcoin in its usual arrogance by declaring it part of "The War on Terrorism and Drugs" or something, i think that in the vast majority of the world - or as the Americans call it "the rest of the world" - Bitcoin will continue to do well...  Wink


If the US bans bitcoin, much of the rest of the world would gravitate towards it because it irritates the US government.  Including many US citizens.

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

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May 16, 2011, 10:07:00 PM
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Even if "The US" bans such things as Bitcoin in its usual arrogance by declaring it part of "The War on Terrorism and Drugs" or something, i think that in the vast majority of the world - or as the Americans call it "the rest of the world" - Bitcoin will continue to do well...  Wink


If the US bans bitcoin, much of the rest of the world would gravitate towards it because it irritates the US government.  Including many US citizens.

I was just about to say that. Everyone in the US breaks laws every day. Some accidently; many on purpose. Unless the gov starts murdering smalltime users a law will have little effect.

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May 16, 2011, 10:31:21 PM
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This will be difficult task, US government is fighting few years with poker online and that battle is far from over - a common thing in thise cases is money transfer but BTC has big adventage - its decentralized Smiley

I hope you get what I meant Wink

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May 17, 2011, 03:04:50 AM
 #15

I just buy bitcoins from bitmarket.eu in euros then.

 Smiley
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May 17, 2011, 03:12:04 AM
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I wonder if there could be a way to create a shadow market exchange.

Basically it would be like MtGox, but instead of explicitely trading bitcoins, we would trade some other digital stuffs, such as images.  The bitcoin transfers would still occur but in an hidden way.

If some customers get "caught", others could just deny having done the same thing.
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May 17, 2011, 03:39:46 AM
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The US would have to get MUCH worse before it would do something like this. You'll flee the country long before it happens, even if you have to carry all your worldly goods on your back to escape.

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May 17, 2011, 04:03:21 AM
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The single biggest protection of the Bitcoin economy against a US legal shutdown is that millions of other people around the world would be using Bitcoins, as others have stated. If the market is robust outside the US, then a crackdown inside would be limited in effect.

If, on the other hand, Bitcoin becomes primarily a US phenomenon, then a crackdown by the Gov would have severe consequences. Fortunately, I see people all over the world wanting to use Bitcoin once it matures and is understood - just as the internet is not a "US thing" neither will be Bitcoin.
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May 17, 2011, 07:14:18 AM
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A congress that banned BitCoin would have to be sure that such a ban did not violate The Constitution, in particular the First Amendment.

A Federal ban would probably instigate legal cases against the ban, putting the value in limbo, especially if there are injunctions. It may pit the Executive branch against the Legal branch given the communication aspect of BitCoin transactions clearly make it a form of expression.


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May 17, 2011, 07:18:04 AM
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The US would have to get MUCH worse before it would do something like this. You'll flee the country long before it happens, even if you have to carry all your worldly goods on your back to escape.

some days i already feel like doing this.. -.-

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