Cryptocurrencies have long been cited as a threat to traditional financial systems. According to most government authorities, they have the potential to undermine the control of central banks, which to an extent they do. But this is exactly what cryptocurrencies are about. Regaining control.
Government officials often like to point out concerns that cryptocurrencies can facilitate drug trafficking, money laundering and ransomware due to it’s anonymous nature. But what they often fail to realize is that cryptocurrencies provide an entirely transparent chain of transactions that can be traceable and readable by anyone. That’s not something that’s ideal if you’re a criminal mastermind…
What they also forget to mention is that the traditional financial system is much easier to use and much more commonly used for illicit and illegal activity, with even “reputable” financial institutions getting in on the act.
Currently, just a handful of countries have blanket banned cryptocurrencies. Several others have also introduced partial bans, by blocking financial institutions from dealing with crypto. But so far, the wider impact of these restrictions have been fairly limited. Despite their best efforts to clamp down on the crypto industry, nations are still failing to prevent their citizens from accessing cryptocurrencies, with a lot of their citizens still interacting with forrign exchanges and Web 3.0 technology by using virtual private networks (VPNs). So this raises the question, can a nation actually successfully ban cryptocurrency?
Currently, cryptocurrency is legal in most of the world’s richest and most powerful nations. However there is always constant fear throughout the industry that a global superpower like the U.S would one day attempt to ban crypto. But even if one day U.S government officials wanted to ban crypto, it would be harder than most people think, with the main problem being that billions of dollars have been invested in cryptocurrency by individuals and firms.
But there still are some risks that we should be aware of. We already know that most regulators and lawmakers hate the idea of cryptocurrencies. And while there’s no evidence to suggest an imminent outright ban on cryptocurrencies in coming, it would still be theoretically possible to impose harsh regulations on the crypto industry, making it very difficult to obtain and use the digital assets without having to officially ban them. However doing this would come at some serious costs and it could actually backfire.
Firstly, cryptocurrencies like Bitcoin are already too deeply entrenched in the global financial system. Banning crypto would mean closing down institutions that oversee billions of dollars of assets, killing tens of thousands of jobs and fueling a black market. Let's not forget that enforcing these restrictions would be very, very difficult anyway.
Unless a government were to exert strict control over the Internet, their citizens can almost certainly engage in Web 3.0 technology, run nodes and complete crypto transactions with little extra effort. And for those of you that doubt this, it’s already proven by the significant number of crypto users in countries that have already “banned” the entire industry…
And some people question whether tighter restrictions on cryptocurrency would simply incentivise people to obtain them. This is because government clampdowns would illustrate that they attempt to restrict their citizen’s freedom, which would actually highlight the usefulness of decentralized currencies and protocols altogether.
Some nations have already enacted blanket bans on cryptocurrencies. However, actually enforcing these bans has proven to be challenging. Modern technologies allow even citizens of repressive regimes to access “banned” cryptocurrencies. Because cryptocurrencies are essentially just pieces of code, they cannot be banned. Having said that, governments could always create challenging barriers to entry.
In most cases, regulation will be a good thing for crypto. That is if the correct regulations are put in place. These “correct” regulations would legitimize crypto as an asset class and provide confidence for more skeptical investors and institutions to adopt the technology too. However this comes as a double edged sword.
If regulations are put into place that purposely limit the capabilities and possabilities of the technology then nations will risk losing out on being involved in one of the fastest growing industries in the world. Blanket bans, or strict regulations that attempt to act as unofficial blanket bans, will almost certainly cause black markets and legitimate technologies and projects to move abroad. And ultimately, in the long-term, it will be the nations that imposed these wrongful regulations that miss out.