Can Governments Ban Bitcoin?

Recently, I became Most Viewed Writer on Bitcoin and cryptocurrency at Quora.com. I don’t typically mirror these posts at A Wild Duck. After all, the sites are linked and my articles at both sites Quora_Most_Viewed_splashrank highly in an organic search. But a question posed today is highly relevant to this Blog. Here, then, is my reply to the question
“How can governments ban Bitcoin?”


Governments can enact legislation that applies to any behavior or activity. That’s what governments do—at least the legislative arm of a government. Such edicts distinguish activities that are legal from those that are banned or regulated.

You asked: “How can governments ban Bitcoin?” But you didn’t really mean to ask in this way. After all, legislators ban whatever they wish by meeting in a congress or committee and promoting a bill into law. In the case of a monarchy or dictatorship, the leader simply issues an edict.

So perhaps, the real question is “Can a government ban on Bitcoin be effective?”

Some people will follow the law, no matter how nonsensical, irrelevant, or contrary to the human condition. These are good people who have respect for authority and a drive toward obedience. Others will follow laws, because they fear the cost of breaking the rules and getting caught. I suppose that these are good people too. But, overall, for a law to be effective, it must address a genuine public need (something that cries out for regulation), it must not contradict human nature, and it must address an activity that is reasonably open to observation, audit or measurement.

Banning Bitcoin fails all three test of a rational and enforceable law.

Most governments, including China and Italy, realize that a government ban on the possession of bits and bytes can be no more effective than banning feral cats from mating in the wild or legislating that basements shall remain dry by banning ground  water from seeking its level.

So, the answer to the implied question is: A ban on Bitcoin could never be effective.

For this reason, astute governments avoid the folly of enacting legislation to ban Bitcoin. Instead, if they perceive a threat to domestic policy, tax compliance, monetary supply controls or special interests, they discourage trading by discrediting Bitcoin or raising concerns over safety, security, and criminal activity. In effect, a little education, misinformation or FUD (fear, uncertainty and doubt) can sometimes achieve what legislation cannot.

Reasons to Ban Bitcoin … a perceived threat to either:

  • domestic policy
  • tax compliance
  • monetary supply controls
  • special interests

Methods to Discourage Trading (rather than a ban)

  • Discredit Bitcoin (It’s not real money)
  • Raise concerns over safety & security
  • Tie its use to criminal activity

Avoiding both a ban—and even official discouragement

There is good news on the horizon. In a few countries—including the USA—central bankers, monetary czars and individual legislators are beginning to view Bitcoin as an opportunity rather than a threat. Prescient legislators are coming to the conclusion that a distributed, decentralized trading platform, like Bitcoin, does not threaten domestic policy and tax compliance—even if citizens begin to treat it as cash rather than a payment instrument. While a cash-like transition might ultimately undermine the federal reserve monetary regime and some special interests, this is not necessarily a bad thing—not even for the affected “interests”.

If Bitcoin graduates from a debit/transmission vehicle (backed by cash) to the cash itself, citizens will develop more trust and respect for their governments. Why? Because their governments will no longer be able to water down citizen wealth by running the printing press, nor borrow against unborn generations. Instead, they will need to collect every dollar that they spend or convince bond holders that they can repay their debts. They will need to balance their checkbooks, spend more transparently and wear their books on their sleeves. All good things.

Naturally, this type of change frightens entrenched lawmakers. The idea of separating a government from its monetary policy seems—well—radical! But this only because we have not previously encountered a technology that placed government accountability and transparency on par with the private sector requirement to keep records and balance the books.                                       [continue below image]…

What backs your currency? Is it immune from hyperinflation?

What backs your currency? Is it immune from hyperinflation?

Seven sovereign countries use the US Dollar as their main currency. Why? Because the government of these countries were addicted to spending which leads to out-of-control inflation. They could not convince citizens that they could wean themselves of the urge to print bank notes with ever increasing zeros. And so, by switching to the world’s reserve currency, they demonstrate a willingness to settle debts with an instrument that cannot be inflated by edict, graft or sloppy bookkeeping.

But here’s the problem: Although the US dollar is more stable than the Zimbabwe dollar, this is a contest in relative trust and beating the clock. The US has a staggering debt that is sustained only by our creditors’ willingness to bear the float. Like Zimbabwe, Argentina, Greece and Germany between the wars, our lawmakers raise the debt ceiling with a lot of bluster, but nary a thought.

Is there a way to instill confidence in a way that is both trustworthy and durable? Yes! —And it is increasingly likely that Bitcoin is the way to the trust and confidence that is so sorely needed.

Ellery Davies is a frequent contributor to Quora. He is also co-chair of Cryptocurrency Standards Association and editor at A Wild Duck.

Debt, Obamacare & Recurring Fiscal Crisis

Senator Ted Cruz leands an assault on Obamacare

Senator Cruz: Assault on Obamacare

There are a plethora of opinions about the latest fiscal crisis. Take your pick. Senator Ted Cruz certainly has an opinion, and he will toss America down a hole to prove it.

Actually, the senator and I share significant common ground. We are both deeply concerned about debt and uncontrolled spending. But, beyond these fundamentals, the senator’s foot-shooting tactics, including a quasi-filibuster, doesn’t inspire confidence.

How, do you suppose, that our creditors view these spams of democratic process? Do you think that they worry about default? Do they care if our economy recovers?  I suspect that – like consumer creditors – they attempt to influence behavior and policy to achieve both a payment stream and a long term outcome that is, foremost, favorable to the creditor? Just as with Greece, creditors are certainly entitled to call the shots.

Today, Forbes contributor, Eamonn Fingleton offered an analysis and explanation of the creditor decision process that I find refreshingly clear. It is, quite probably, an accurate prediction of cause and effect as applied to our current fiscal crisis.

Perhaps the reason that Americans lack the intestinal fortitude to ride out a long term investment is because, as a nation, we have been debtors for too long to recall what it is to be an investor!

Americans delude themselves with the fantasy that that a massive debtor has cards to play. They imagine that a creditors’ need for (the debtor’s) continued solvency and unabated consumption gives them strength. But those things aren’t as critical as Americans think. They can always find new customers elsewhere.

It’s a big world and trade barriers are coming down everywhere. The American dream can still be achieved—even with a roaring, world class economy. But to get there from here, we must recognize that we borrowed against our future while the Chinese produced and lent and while the Arabs sucked down our borrowed cash to satisfy our self-imposed oil addiction.

Those events have consequences. Like it or not, the Chinese have earned the upper hand. Today, they hold thousands of dollars of debt over every one of us. This turn of events is not “unfair”. In fact it is wholly fair. That debt is inherent in your TV, smart phone, shoes, toys, auto parts and underwear. Throughout the 90s and 00s, we moved our manufacturing, infrastructure and innovation off shore. All the while, we soaked up Chinese toys, clothes, gadgets, and raw materials and – of course – Mideast oil. We remained faithful to our post war credo:  Consume, consume, consume!

We must stop thinking of ourselves as entitled to anything other than our freedoms, the separation of powers, Hollywood, the Internet and our past glory as historical capitalists (up through the first ⅔ of the 20th century). We are also entitled to our pretty, foreign-made gadgets adorned with American logos. We got these things, because we handed a pawn broker our marker. He trusts us, because he respects the family name. But he is surprised that we keep bowering to pay the bill. In fact, we aren’t really paying the bill. We are simply racking up debt and ignoring the principal.

Now, it’s time to pay our bills. President Obama wants to begin this process while also ensuring that we include universal access to heath insurance. Well, O.K. it’s not really universal access it’s mandatory buy in. Does Obamacare represent socialiaztion of health care? Probably, Yes! Is it the right move in a down economy? Who knows? Do most people support it? I don’t think that we can get a clear answer to that last question, but it certainly seems split across party lines.

But here’s the deal, Congress. Obamacare is a fact! The act was passed and the law was upheld by the highest court. Since then, it has survived dozens of attempts to overturn it. It’s time to apply your remarkable energy to the people’s business!

The US Congress behaves like a whiny child who wants to grab the soccer ball, furlough the players and shut down the stadium. It’s time to accept defeat without using terrorist tactics to make a point. Few Americans want a socialist economy, but through due process, we have chosen to socialize health insurance. Let’s review the logic:

  • I feel that the time for due process is over.
  • You are determined to spend all of your time and resources trying to overturn a done deal.
  • I think that you are crazy.

And it’s very unsettling to lose confidence in our elected officials.

Ellery on ObamacareListen up, Congress! We, the people, don’t like debt. We get your point of digging in. The constant debt increase is not a merry-go-round. It is more like a falling roller coaster with no tracks ahead. We must apply the brakes, and very soon. We get it! But there are two things that we cannot avoid: Paying creditors and accepting political defeat on just how a reduced budget is put together.

Get over it! Accept that you cannot defund a program that was passed and approved. One way or another, we must still deal with the spiraling cost of health care. Now get to work, dammit! Tell us where we must cut the fat and get the job done!