MCViewPoint

Opinion from a Libertarian ViewPoint

EconomicPolicyJournal.com: How the Government Will Shutdown Bitcoin

Posted by M. C. on March 7, 2021

It is a rigged game in favor of the insiders and you are not one of them. There is no way that the Fed is going to want to compete with bitcoin and other cryptocurrencies when the Fed is ready to introduce a Fedcoin.

I don’t doubt the Treasury and Fed are polling right now to test and see what story the public finds as the most acceptable justification for shutting down cryptocurrencies.

https://www.economicpolicyjournal.com/2021/03/how-government-will-shutdown-bitcoin.html

As a follow up to my post, Harvard Professor Warns Central Banks Will Never Allow Bitcoin to Go Mainstream, David Brown emails:

It would be helpful to understand the details when you say “The hammer is there whenever they want to use it”. The bitcoiners will say BTC is uncontrollable. My sense is, the devil is in the details. I have yet to hear a clear discussion of the “plumbing” of how they will clamp down, and the bitcoiners’ counter-arguments. It would be very enlightening.

RW response: 

Well, bitcoiners would like you to focus on the “plumbing.” 

They have all kinds of fancy arguments of this kind and that. 

From another commenter at the post who talked about the plumbing:

Point being is that the selling point for bitcoin is that its payments are completely uncensorable as a result of the CPU cycles. Nothing and no one can stop you from sending a payment over the bitcoin network to whomever you want to.

Second level solutions can be built on top of bitcoin so you can buy your coffee, but having an unchangeable; indisputable, uncensorable way to send value is extremely valuable, even if you never buy coffee with it.

But shutting down bitcoin, in a way, is simple so you could never be able to buy coffee with it. It doesn’t matter what the plumbing is. Here is the law that could be enacted:

“The government hereby makes it illegal to conduct transactions in bitcoin.”

This instantly eliminates the ability for bitcoin to be used in retail transactions or in banking—or for an individual to be paid wages in bitcoin. If there are severe penalties, and there would be, what retailer or bank or cafe or other business is going to accept bitcoin in a transaction?

As for the uncensorable element, again we are talking about plumbing that has nothing to do with human exchanges.

Making bitcoin illegal would push bitcoin into the shadows, uncensorable or not. What are you going to do with bitcoin if it is in the shadows? Being a bitcoin dealer would be an extremely high-risk business. Transaction costs would soar. Indeed because of the nature of bitcoin transactions, the risk on any given exchange being exposed would be a lifetime proposition.

Bitcoiners focused on the “plumbing” fail to look at the situation from the non-plumbing transaction part of the exchange.

I hasten to add that as a first step, I don’t expect the government to shutdown bitcoin or other cryptocurrency trading right away. The first step will be more regulations to identify bitcoin holders.

In a discussion I had just yesterday on another topic with some Silicon Valley people, we talked for a bit about bitcoin. Our thinking went this way:

There is a massive amount of money to be made in shutting down bitcoin.

If you short it before the shutdown, you could make a lifetime-size amount of money that puts you on easy street if you are leveraged. 

When the major league insiders are ready, this is what will happen.

Right now the more buying of bitcoin, the better for them. The more liquid the market, the more bitcoin can be shorted when the time is right. And the time will eventually come. 

It is a rigged game in favor of the insiders and you are not one of them. There is no way that the Fed is going to want to compete with bitcoin and other cryptocurrencies when the Fed is ready to introduce a Fedcoin.

I don’t doubt the Treasury and Fed are polling right now to test and see what story the public finds as the most acceptable justification for shutting down cryptocurrencies.

Be seeing you

One Response to “EconomicPolicyJournal.com: How the Government Will Shutdown Bitcoin”

  1. […] https://mcviewpoint.com/2021/03/07/economicpolicyjournal-com-how-the-government-will-shutdown-bitcoi… […]

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