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When it comes to highly popular trends or positions, it’s hard to see how the U.S. government can effectively go against the will of the populace with its current legal environment and the checks and balances on government’s power. Just look at how inept it was trying to get people to take a COVID vaccine. However, people in the U.S. do also tend to live in a Disneyland compared to other countries where the power of government to effect immediate social and monetary change can happen in a day or less.
Cryptocurrency has become a global phenomenon, with Bitcoin and other digital currencies gaining popularity in recent years. However, so-called concerns over its potential misuse, including money laundering, tax evasion, and illicit transactions, have prompted governments worldwide to examine their regulatory approaches. Let’s not fool ourselves; the real concern is that crypto could make fiat currency obsolete, which is a direct threat to government power.
So let’s play out a hypothetical scenario of the United States effectively outlawing the use of cryptocurrency in 2024. How exactly would that happen?
Increased Regulatory Measures
American government, aside from wartime, doesn’t have a very good track record implementing top-down directives and people just follow. Instead, the first step will be to over-regulate crypto to the point that it is just gawd-awful to use legally. This would and is starting to include enhanced Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations for cryptocurrency exchanges and wallet providers. In short, no one in the U.S. gets to trade or hold in private.
Such identification regulations would require individuals to provide detailed personal information and undergo thorough background checks before engaging in cryptocurrency transactions. This kind of rule-making under the guise of protection serves two purposes: it identifies all the users to go after later on, and it makes it extremely difficult to have a legal account, especially for those who don’t want the government knowing what is in an account in the first place.
Banning Cryptocurrency Exchanges
The next step is to eliminate the trading connections to fiat channels and trading in general. The government could implement legislation that prohibits these platforms from operating or providing services to U.S. citizens. Regardless of what people want, companies that run exchanges are far easier to threaten and legally squash than millions of people. So, cut the head off the snake but just killing the ability to trade in general. This step alone could significantly impede the ease of converting cryptocurrencies into traditional fiat currencies. There will still be back-channel routes, but for the most part the majority of average users will be blocked, having nowhere to trade anymore.
This method could also be used to corral people into only using recognized channels controlled by recognized banks or brokers. This is the route of the central bank digital coin (CBDC) concept.
Restricting Peer-to-Peer Transactions
One of the challenges in regulating cryptocurrency is its decentralized nature, which allows for peer-to-peer transactions outside the purview of centralized exchanges. To address this issue, the U.S. government could introduce strict regulations on peer-to-peer transactions, requiring individuals to report and disclose any cryptocurrency transactions exceeding a certain threshold. This approach would help deter the use of cryptocurrency for illicit activities.
The most effective practical approach to implement this restriction is through income tax filing. The IRS already requires people to now disclose off-shore accounts as well as crypto exchanges. It’s a very small step to then force people to disclose DeFi exchange use as well and create a penalty for doing so. It’s a damned if you, damned if you don’t bottle. If a user reports, they get punished to convince them to stop. If they don’t report and lie and get caught, the user can be criminally charged for perjury on an income tax filing (which can be really bad). This approach would easily scare off most people, trimming down crypto use to just the die-hard stubborn minority.
Prohibiting Cryptocurrency Mining
Cryptocurrency mining, the process of validating transactions and adding them to a blockchain, could also be targeted. The government could introduce regulations that make cryptocurrency mining completely illegal, effectively eliminating the creation of new cryptocurrencies within the country. This step wipes out anyone using crypto to generate sizable income outside of trading. China already implanted this rule within its own borders.
Collaboration with Partners
Since just about everyone in the U.S. needs to use an Internet Service Provider (ISP) to connect to the Internet, the U.S. government could easily effect a chokehold on activity by having ISP report users and even require ISPs to block crypto activity by hard controls and coding.
Internationally, the United States would need to collaborate with overseas partners to effectively outlaw crypto use. By engaging with other countries, the U.S. could establish consistent regulations and deter the cross-border movement of cryptocurrencies with hefty criminal charges shared by both countries and law enforcement. Multilateral efforts could include sharing information on suspicious transactions, harmonizing regulatory frameworks, and collectively working towards reducing the illicit use of cryptocurrencies altogether.
Awareness Campaigns and Education
To gain public support for outlawing cryptocurrency, the government would need to invest in awareness campaigns and education.This will likely come across as politically-oriented messaging demonizing crypto and linking it to horrible criminal activity. Fancy government titles like anti-crypto czars could be appointed, and multiple arrests being paraded in front of the media could be used to create perpetuation of crypto being bad, like illegal drug trafficking. By this point the government’s marketing focus would be on prevention and recurrence, having squashed the primary original use of crypto and shutting of its common access points.
Don’t Underestimate the Stupidity of Government Leaders With Crypto
While hypothetical, crypto-banning measures could be considered in response to concerns over illicit activities and the potential destabilization of traditional financial systems (the real concern if you’re in Vegas betting). Without anyone lobbying to protect crypto, the only ones speaking to political leaders would be the banks, who have no interest in seeing crypto continue, especially when it can command trillions in dollars banks would prefer they get to handle. So, yes, a crypto ban is very possible in this decade unless someone comes up with a viable way to make it a win-win for the powers that be and people.
