If your argument is that governments should not regulate cryptocurrency because the point of cryptocurrency is to evade government regulation, you should expect cryptocurrency to become illegal rather than regulated.
The entire purpose of cryptocurrencies that they and their economies cannot be regulated by any government. A regulated cryptocurrency is just fiat with more steps and a contradiction in terms.
That's making a specific argument (which you are doing without supporting it in anyway).
I am saying you don't get to hedge your argument like this: crypto cannot be both an important part of evading government censure, and too small to be worth government effort to censure.
If someone wants to make the middle ground argument, make it, but you're starting from the position of government already engaging in significant regulatory interest in the use of cryptocurrencies.
Cryptocurrencies offer a single property that is both good and bad: there is no authority who can reverse or block a transaction against the will of the participants.
Lawsuits and criminal proceedings can cause government authority to direct banks and financial institutions to do what they say. Government can set rules to block transactions, or to demand more identification to be tied to a transaction. Even cash can be physically seized and taken by the government. I'm not arguing this is good or bad, just that it is. You can come up with a list of circumstances where this authority is a bad thing, or a good thing.
And in cases like this, we see why that overriding authority can be a good thing. If your bitcoins are stolen, there is nothing anyone can do to get them back. They are gone.
True, but the fact that government regulation is needed kinda voids the argument that crypto currencies are great because they can't be manipulated by the government like a fiat currency.
Oh, there are countless ways governments can regulate crypto currencies without such regulation being built into the currencies themselves. Right now, crypto currencies are entirely useless for 99 percent of real world purchases. You cannot buy a cup of coffee with your satoshis. All you can do is to buy a few digital assets and a tiny fraction of the world's real assets. You might as well try to buy dinner with your facebook stock or to pay your rent with cacao or tulips.
Let's say that government decides the only legal tender for purchasing real estate is the government's fiat currency of choice, for example euros or dollars, and that the only way to obtain a deed or to legally borrow money is to show through a government run website that you paid for the real estate with that fiat currency. That's it. Now government indirectly controls crypto currencies. You can develop all the crypto currencies you want, but if you can't use it for purchasing real estate, the ramifications of that constraint will trickle down through almost anything else. Then receiving rent in crypto is less interesting. then being paid in crypto is useless.
And about that: Want to pay or receive a salary? What if government says that can only happen with fiat and that any attempt of paying or receiving salary in crypto currencies is a felony that will land you in a fiat funded correctional facility for years? You would think twice. How will government know? The same way they know that you bought drugs: Through witnesses, agents, ISPs telling on you etc. It doesn't have to be 100 percent efficient. If they have the ability to catch 0.01 percent of transactions and the punishment is severe, most people will not do it. Don't tell me that crypto is encrypted and anonymous. As soon as you use it for a real world thing, you leave traces. You buy a car; someone sold it. Someone heard. Someone saw. You can't show a fiat transaction; that will be the proof that legislator says is enough to convict you. If government decides to make crypto illegal, or to make certain transactions illegal when paid with crypto, crypto will only be good for the grey economy.
Or what if government said that no matter in what currency you make your money, taxes have to be settled in fiat.
The point is that all government has to do is to ensure that fiat is needed for certain key parts of the economic system. Then people will need fiat, and government can then focus on regulating the exchanges between fiat and crypto. There is a very limited number of banks, and a small number of payment providers and a small number of ISPs. They just need to ensure that these organisations enforce the rules (register who bought or sold what crypto currency etc.). Pretty soon, the only crypto currency that 99 percent would use would be the government backed one, the one that had backdoors or whatever government demanded built in.
What you've really seen play out is that the government hasn't bothered to regulate cryptocurrencies yet. After they regulate cryptocurrencies, this becomes much easier to prevent.
Government has a right to regulate in order to deal with negative externalities and the negative externalities from Bitcoin and other crypto are extremely large. Most of crypto has been various type of financial schemes and regulators should ensure at a minimum that all investors in such schemes were properly accredited and impose regulation if the tokens were historically taking unaccredited investment.
The government also has the right to regulate polluters and even an outright ban is reasonable if they conclude that the environmental cost of proof of work vastly outweighs the very limited use cases and benefits that have been shown to date.
Finally, and I think the strongest argument is the government is allowed to regulate financial transactions. Bitcoin and other crypto intentionally circumvent this by removing the party conducting the financial transaction. Government could conclude this is unreasonable resulting in a ban or could create reporting requirements for any cryptocurrency transaction, subjecting one or both end users to requirements currently dealt with by banks. The idea that crypto-proponents seem to have is that removing the bank should remove all reporting requirements on transactions and I don’t see a reason for that to be true.
I think in aggregate there is a fairly reasonable case for a ban across multiple substantial issues.
And no, the government does not owe people for the price consequences of its regulatory policy. Investors in casinos are not made while for changes in gambling laws.
This is such a nonsensical argument. Crypto is a huge space with myriad benefits, which are not negated by having some elements regulated.
For example, perhaps you are in favor of crypto because it is (i) harder for a state to seize or (ii) impossible for a single state to inflate. Those are in part possible because of the distributed decentralized nature of cryptocurrency. Being in favor of those two things does not mean you cannot also be in favor of regulating people that manipulate crypto market by wash trading, in favor of arresting thieves and hackers, in favor of banning insider trading, etc. You can have a system with trustless elements and that still relies on the laws and regulations to enforce certain aspects.
Unfortunately with governments it's no longer about what makes sense but about what they can get away with. Much like you can expect a giant for-profit business to do anything to maximize its profit, one can expect a government to do what it can to maximise its control. That's just an observation.
Regulating cryptocurrencies can have the same effectiveness that regulating information exchange through the internet had. Yeah sure it can be a bit impractical or scary for most to go around artificial limitations imposed by their state but it is practically impossible to keep the really motivated from doing what they want.
Governments don't regulate technologies, they regulate people. There are a million ways governments (who are also made up of people) can and will regulate bitcoin and the like. The persistent belief among some cryptocurrency proponents that they're invincible to the powers of government is really naive.
Just because there isn't regulation now means jack squat. It's not a feature, it's a side effect of newness and reactionary politics.
You're missing the point. Cryptocurrencies are specifically designed to evade regulations. Everything else —efficiency, cost, convenience, usability— is sacrificed in order to achieve this goal.
Nobody is on board with crypto. And while governments can't shut it down, they can strongly discourage people from putting money into it, by simply enforcing existing regulations, which is what I think governments will start to do now.
If you don't believe that the government has the right to make laws, then that's one argument.
If you don't believe that the government should be allowed to attempt to tackle money laundering, that such crime is simply to be shielded at all cost from being reduced, then that's another.
So the question is "what do you want?".
And the cryptocurrency community has been completely unable to present anything that isn't literal anarchy or feudalism. And guess what, nobody will be able to sell anarchy or feudalism to the general public, or even outside a very very small community.
See I don't understand this. Just because it is said that crypto is some decentralised no government economy surely does not mean it isn't governed by existing laws and regulations for their processes and actions? Especially the fact that for the most part, it gets redeemed into fiat currency.
As I stated in the original comment, cryptocurrency violates innumerable laws every time a block is produced, but governments have not shut them down. The laws are already not being enforced!
I still maintain that if the government truly wanted to regulate cryptocurrency they would go after average citizens and add onerous reporting requirements. Even with decentralized exchanges, the government can still find a way to clamp down on citizens using cryptocurrency. Sure, it would be impossible to prevent someone from using a decentralized exchange, but would you personally risk being prosecuted for doing so?
You claim that the only possible uses of cryptocurrency are to circumvent the law. If that were the case, governments would have simply made holding or trading it illegal -- but with few exceptions (bitcoin in China), they have not done so.
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