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Author Topic: What happens when Bitcoins are illegalized in the whole world?  (Read 6325 times)
simme101
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May 17, 2011, 01:48:04 PM
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Being the extreme realist, if not pessimist, I believe that Bitcoins will be made illegal sooner rather than later. It will obviously be hard to enforce this. However, the fact still remains: it's ILLEGAL. You wont be able to buy or sell your Bitcoins through bank transfers and webpages cannot legally accept payments in Bitcoins.

My thought was that I could buy some Bitcoins today and cash out in the future (hopefully x100 the value  Tongue), but I have no intent in doing anything illegal.

So in one year (or however long time it takes) will I be sitting with a 1000 Bitcoins that have no (legal) value? What are your thoughts? Am I completely wrong here or what?

also, first post!  Grin
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barbarousrelic
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May 17, 2011, 01:55:07 PM
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I highly doubt they will be flat-out illegal to possess or use. Barter is 100% legal in the United States.  They will certainly never be illegal worldwide. In the US, at worst, they may become illegal to purchase or sell with bank transfers or credit cards, a la internet poker. Or, even more likely, you'll see people prosecuted for not paying taxes owed on Bitcoin income. But you will still have people willing to exchange goods and services for them.

Do not waste your time debating whether Bitcoin can work. It does work.

"Early adopters will profit" is not a sufficient condition to classify something as a pyramid or Ponzi scheme. If it was, Apple and Microsoft stock are Ponzi schemes.

There is no such thing as "market manipulation." There is only buying and selling.
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May 17, 2011, 01:55:46 PM
 #3

What happens when Bittorrent is illegalized in the whole world?

"Bitcoin had been transformed from an anarachistic challenge to the financial status quo, to the crypto spawn of Satan, fuelled by cut-throat greed and delusions of avarice." - MatTheCat
"these people don't seem to want to stop till Bitcoin is completely destroyed and left like an old cum rag in the corner of the room." - ShroomsKit
arturh
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May 17, 2011, 02:00:39 PM
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Let's say they're determined to close it down. They could port scan every IP in the US and put people running the software in jail. Then you switch from raw TCP connections to Tor or something like that. The Government would need to be extremely repressive in order to stop BitCoin. As in putting people in Jail, for running some software.

That's the nice thing about being decentralized. At most they can close Mt. Gox, but then another mtgox will open somwhere else. In fact, Mt Gox is the Achilles' heel at the moment.
arturh
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May 17, 2011, 02:16:40 PM
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From wikipedia: Remittances totaled US$414 billion in 2009.

You know how much Western Union charges? At what rates?

There are whole countries living of providing the service Bitcoin provides. People actually fly to this places to store their money.

From wikipedia:  Tax havens have 1.2% of the world's population and hold 26% of the world's wealth, including 31% of the net profits of United States multinationals.

Someone, somwhere, will allow you to exchange Bitcoins. Be it in Japan, Switzerland, Isle of man, or Sealand. It will boom and crash, but it's too convenient to completely fail. It just must fly under the radar long enough.
simme101
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May 17, 2011, 02:37:30 PM
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Let's say they're determined to close it down. They could port scan every IP in the US and put people running the software in jail. Then you switch from raw TCP connections to Tor or something like that. The Government would need to be extremely repressive in order to stop BitCoin. As in putting people in Jail, for running some software.

That's the nice thing about being decentralized. At most they can close Mt. Gox, but then another mtgox will open somwhere else. In fact, Mt Gox is the Achilles' heel at the moment.

Don't get me wrong, I love the idea, but...

I realize that governments wont be able to enforce a world wide ban to any great effect. However the can still make sure that bank transfers etc. cannot be made to buy/sell bitcoins. And if you can't buy/sell them for real currencies on a site like mtgox, whats the use of mtgox? Also, if bitcoins cannot be tied to a real currency, how would you know the value of it? How could anyone decide on what the value is without an exchange?
 
Someone, somwhere, will allow you to exchange Bitcoins. Be it in Japan, Switzerland, Isle of man, or Sealand. It will boom and crash, but it's too convenient to completely fail. It just must fly under the radar long enough.

So I could just set up an account in Switzerland and trade bitcoins legally? And then transfer them back to my home country? Somehow this sounds a bit like money laundering.
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May 17, 2011, 02:40:04 PM
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Quote
Being the extreme realist, if not pessimist, I believe that Bitcoins will be made illegal sooner rather than later.

Thats why people should start pledging to "colonization of Mars by bitcoin users" project... Wink

My Bitcoin address: 1DjTsAYP3xR4ymcTUKNuFa5aHt42q2VgSg
barbarousrelic
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May 17, 2011, 02:44:17 PM
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Don't get me wrong, I love the idea, but...

I realize that governments wont be able to enforce a world wide ban to any great effect. However the can still make sure that bank transfers etc. cannot be made to buy/sell bitcoins. And if you can't buy/sell them for real currencies on a site like mtgox, whats the use of mtgox?
If mtgox is shut down, something else will be available.

Quote
Also, if bitcoins cannot be tied to a real currency, how would you know the value of it? How could anyone decide on what the value is without an exchange?
Outlawing bank transfers for bitcoin in the US will not stop the exchange of bitcoins for dollars. It won't even make it illegal to exchange Bitcoins for dollars. You could still sell Bitcoins for cash/check/moneyorder or gift cards in the mail, or goods or services.



Quote
So I could just set up an account in Switzerland and trade bitcoins legally? And then transfer them back to my home country? Somehow this sounds a bit like money laundering.


You will still be able to trade Bitcoins for dollars in the US. Barter is 100% legal.

Do not waste your time debating whether Bitcoin can work. It does work.

"Early adopters will profit" is not a sufficient condition to classify something as a pyramid or Ponzi scheme. If it was, Apple and Microsoft stock are Ponzi schemes.

There is no such thing as "market manipulation." There is only buying and selling.
trentzb
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May 17, 2011, 02:53:17 PM
 #9

Also, if bitcoins cannot be tied to a real currency, how would you know the value of it? How could anyone decide on what the value is without an exchange?

Why do you need to "tie" bitcoins to an alternate currency? This is an issue that is hard to overcome and wrap your head around and yes I fall for it sometimes too. The value of a bitcoin should never be based on some other currency although it almost always is. You need to look at the value of a bitcoin because you can trade it for some good or service directly without exchanging it for another currency. Once you can trade bitcoins for enough goods or services that you can live your life without participating in another currency then Bitcoin has won.
Timo Y
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May 17, 2011, 02:56:19 PM
 #10

Buying BTC isn't illegal today.

Most Western nations prohibit the passing of ex post facto laws in their constitutions, so whatever the legal status of Bitcoin may be in future, you cannot be prosectuted for buying them today if you live in one of those countries.

As soon as your country illegalizes Bitcoin flat-out (unlikely IMO) you will have to destroy all your BTC of course.

The best way to destroy your BTC is to encrypt your wallet.dat with a really long password and to then to forget the password.  One day your government might lighten up and decriminalize Bitcoin and then maybe you'll remember your password again out of sheer joy, who knows?  Smiley

Careful though, forgetting passwords is illegal in some countries.  

GPG ID: FA868D77   bitcoin-otc:forever-d
grondilu
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May 17, 2011, 02:57:12 PM
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If bitcoin is ever made illegal worldwide, I'll just hope international organized crime will have already started to use it and offer a shadow exchange service.
simme101
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May 17, 2011, 03:00:07 PM
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You will still be able to trade Bitcoins for dollars in the US. Barter is 100% legal.

But if governments prohibit the possession and selling of bitcoins (much like illegal drugs), would you still be able to trade them?
(would they? I think so, seeing what bitcoins could be used for)

I'm not quite sure how barter would work for bitcoins, but whatever.

barbarousrelic
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May 17, 2011, 03:01:47 PM
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You will still be able to trade Bitcoins for dollars in the US. Barter is 100% legal.

But if governments prohibit the possession and selling of bitcoins (much like illegal drugs), would you still be able to trade them?
(would they? I think so, seeing what bitcoins could be used for)

I'm not quite sure how barter would work for bitcoins, but whatever.



Prohibition on the possession of Bitcoins in the US is extremely, extremely unlikely. There is no reason they could outlaw Bitcoin that would not also apply to cash.

Every Bitcoin transaction is barter from the government's perspective.

Do not waste your time debating whether Bitcoin can work. It does work.

"Early adopters will profit" is not a sufficient condition to classify something as a pyramid or Ponzi scheme. If it was, Apple and Microsoft stock are Ponzi schemes.

There is no such thing as "market manipulation." There is only buying and selling.
simme101
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May 17, 2011, 03:03:29 PM
 #14

Also, if bitcoins cannot be tied to a real currency, how would you know the value of it? How could anyone decide on what the value is without an exchange?

Why do you need to "tie" bitcoins to an alternate currency? This is an issue that is hard to overcome and wrap your head around and yes I fall for it sometimes too. The value of a bitcoin should never be based on some other currency although it almost always is. You need to look at the value of a bitcoin because you can trade it for some good or service directly without exchanging it for another currency. Once you can trade bitcoins for enough goods or services that you can live your life without participating in another currency then Bitcoin has won.

Good point. But how would you decide the value? Would that be up to each individual trader or what? Clearly this will not work in a global environment...
mp420
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May 17, 2011, 03:05:09 PM
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I'm quite pessimistic about this as well. 99% of the rest of the world has more liberal drug laws than the US; hell, even possession of "drug paraphernalia" is illegal in some of the states (it's perfectly legal just about everywhere else). And like it or not, the US right wing loonies can instill a lot of legistlation practically everywhere through international treaties (and the $billions they pour into their propaganda machine). And bitcoin is not important enough that a significant portion of the rest of the world would resist.

I count on the fact that strict enforcement of any law that is as ambiguous as a ban on bitcoins is going to be impossible to enforce. If bitcoin becomes a significant factor in anything, we will have a "war against money laundering", a lot like the war against drugs or the war against terrorism; civil rights will be further repressed but the stated objective of the legistlation will not be reached in any significant degree.
barbarousrelic
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May 17, 2011, 03:05:19 PM
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Good point. But how would you decide the value? Would that be up to each individual trader or what? Clearly this will not work in a global environment...

The same way the value of the dollar is decided. By buyers and sellers agreeing on prices. Clearly it does work.

Do not waste your time debating whether Bitcoin can work. It does work.

"Early adopters will profit" is not a sufficient condition to classify something as a pyramid or Ponzi scheme. If it was, Apple and Microsoft stock are Ponzi schemes.

There is no such thing as "market manipulation." There is only buying and selling.
xel
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May 17, 2011, 03:06:47 PM
 #17

Being the extreme realist, if not pessimist, I believe that Bitcoins will be made illegal sooner rather than later. It will obviously be hard to enforce this. However, the fact still remains: it's ILLEGAL. You wont be able to buy or sell your Bitcoins through bank transfers and webpages cannot legally accept payments in Bitcoins.

My thought was that I could buy some Bitcoins today and cash out in the future (hopefully x100 the value  Tongue), but I have no intent in doing anything illegal.

So in one year (or however long time it takes) will I be sitting with a 1000 Bitcoins that have no (legal) value? What are your thoughts? Am I completely wrong here or what?

also, first post!  Grin


One possibility would be to keep using BitCoin over anon networks transport.

I think our project fits well here - BtcFn (bitcoin-over-freenet and other crypto networks).
http://bitcointalk.org/index.php?topic=7181.0

FreeNet (http://freenetproject.org) - un-censorable, anon, secure, distributed storage network (files,chat). Install it in 5 minutes!. Also use FMS/Frost for chat. #freenet
trentzb
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May 17, 2011, 03:12:48 PM
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Good point. But how would you decide the value? Would that be up to each individual trader or what? Clearly this will not work in a global environment...

Of course it will work globally. And yes, you decide the value individually. What is the most common outcome when an individual allows/trusts someone else (central authority) to decide the value of a currency? Why not place that responsibility in your own hands. Do you really need someone else to tell you what the value of your currency is so you can plan how to spend it? If so then stick with a fiat currency and all is well.

If trader A knows he can buy screws/nuts to create his widgets using bitcoins and trader B wants a widget and will pay for it using bitcoins there is no reason for anyone else to be involved in completing that transaction nor does anyone else need to set a price for the widget. If a third party enters into that transaction they will most definitely want their cut for whatever efforts they claim to have contributed.
simme101
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May 17, 2011, 03:27:50 PM
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Good point. But how would you decide the value? Would that be up to each individual trader or what? Clearly this will not work in a global environment...

Of course it will work globally. And yes, you decide the value individually. What is the most common outcome when an individual allows/trusts someone else (central authority) to decide the value of a currency? Why not place that responsibility in your own hands. Do you really need someone else to tell you what the value of your currency is so you can plan how to spend it? If so then stick with a fiat currency and all is well.

If trader A knows he can buy screws/nuts to create his widgets using bitcoins and trader B wants a widget and will pay for it using bitcoins there is no reason for anyone else to be involved in completing that transaction nor does anyone else need to set a price for the widget. If a third party enters into that transaction they will most definitely want their cut for whatever efforts they claim to have contributed.


Ok, so I'm going a bit off topic here but there would also be an issue where people can't know what other traders are setting prices at (because those kinds of websites are illegal). If you are going to buy something in a competitive market then you usually research which alternative gets you the most bang for your buck. How would this be accomplished?
barbarousrelic
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May 17, 2011, 03:32:56 PM
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Ok, so I'm going a bit off topic here but there would also be an issue where people can't know what other traders are setting prices at (because those kinds of websites are illegal). If you are going to buy something in a competitive market then you usually research which alternative gets you the most bang for your buck. How would this be accomplished?


Look at what price in Bitcoin things are being sold at anywhere in the world, look up the dollar value of those goods being sold for Bitcoin, and there's your going market rate. Even if Bitcoin becomes 100% illegal and subject to a bloated federal War on Bitcoin, it will still be legal for people to publish going exchange rates.

Do not waste your time debating whether Bitcoin can work. It does work.

"Early adopters will profit" is not a sufficient condition to classify something as a pyramid or Ponzi scheme. If it was, Apple and Microsoft stock are Ponzi schemes.

There is no such thing as "market manipulation." There is only buying and selling.
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