Can the Government shut-down Bitcoin? What This Means to You

Can the Government Shut Down Bitcoin?

According to the law of the land, the government of any country holds the ability to enact any number of prohibitive legislation that applies or relates to any behavior or activity.

Legislative reforms like these are used by the government to distinguish and control activities that are legal from those that are banned or regulated.

Speaking from a strictly technical viewpoint, the 2012 European Central Bank Report on Virtual Currency Schemes of late 2012, states that there is no legal argument preventing nations from regulating or banning virtual currencies.

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Why Would the Government want to ban Bitcoin?

The primary concerns against an unregulated peer-to-peer transaction element come from the Government’s concern that it could pose a threat in these following situations:

  • Domestic Policy: If the domestic policy is not encouraging towards Bitcoins and starts to view it as a parallel economy system.
  • Tax Compliance: No regulation and low traceability means that it gets extremely difficult to understand whether an individual can be taxed and how much if he chooses to use Bitcoins
  • Monetary Supply Controls: Digital Cryptocurrency do not require transactions, storage and physical accounts keeping. The Government might not feel comfortable about giving such freedom to consumers right away.
  • Special Interests: The concern that Bitcoins might be used in unlawful activities through the digital domain is another concern.

What is the current situation?

As of now, there is no reason to assume or believe that the Government is looking to ban or shut down Bitcoins and here is why:

  • In comparison with mainstream economy, the total size of the Bitcoin economy is negligible and does not create any adverse effect. In fact, that makes now one of the best times to invest in Bitcoin, before it turns into absolute hot property that everyone guns for.
  • As transactions to a certain degree are traceable due to banking operations associated with Bitcoins, there is no immediate fear of negative unchecked propulsion of Bitcoins.
  • Nations like China who has tried to put on a check on Bitcoin and alternate Cryptocurrency have not been able to make a positive impact in favor of their efforts and have decided to not invest resources into shutting down Bitcoin.

The concern then seems to turn into a different question: “Can a government ban on Bitcoin be effective & whether such bans will affect Bitcoin consumers and traders?”

A ban on Bitcoin is difficult to enforce

  • Bitcoin does not have a single center that the detractors can shut down.
  • There is no single organization or person that controls Bitcoin.
  • Bitcoin transactions don’t go through a central clearing house and regulations. Thus one cannot stop people from downloading Bitcoin wallets and sending each other Bitcoins.
  • If Bitcoin is banned, there is every possibility that some other alternate currency can come up and it will completely defeat the purpose of the ban.

Game Theory: The Streisand effect

In 2003, a popular Hollywood celebrity sued a photographer for displaying a photograph of her Malibu, California, home as it illustrated effects of coastal erosion and potentially devalued the property.

The picture had at that point been downloaded a total of only six times. But the lawsuit had the unintended consequence of drawing attention to the photograph, which suddenly became wildly popular and spread rapidly through the internet.

As a result of the case, public knowledge of the picture increased substantially; more than 420,000 people visited the picture and the lawsuit ended up doing the opposite of what it intended.

Game Theory suggests that an attempt to ban Bitcoin by a government or a central bank can have the unintended consequence of making it even more popular, especially among a demographic that had previously never heard of Bitcoin.

Alternate Stances the Government could take:

  • Inform citizens about Bitcoin and let them make an informed decision.
  • It could raise concerns over safety & security & have an integration systems that welcomes Bitcoins as part of the economy
  • Curb its use in case of criminal activity by employing strict cyber security measures.


In the United States, prescient bankers and legislators are warming up to the idea of Bitcoin as an opportunity rather than a threat.

The possibility that a distributed, decentralized trading platform, like Bitcoin, does not threaten domestic policy and tax compliance and can be beneficial to the economy is gaining popularity and credence each passing day.

In the future, Cryptocurrency will be included in all financial systems around the world and the economy will change for the better because of that.

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