“I think we were past that point of banning Bitcoin in the US very early on because you’d have to shut down the internet.” - Hester Peirce, SEC Commissioner
China, Egypt, Iraq and Qatar are amongst the countries that have announced a ban on cryptocurrency. But banning crypto is difficult - here's why.
Why do countries want to ban crypto?
- Control: they want control over their monetary policy, which crypto makes difficult.
- Illegal activities: cryptocurrencies can be traded pseudonymously which makes it an easy route for trafficking or money laundering.
- Launch a central bank digital currency: like China, a government may want to launch a government controlled digital currency.
- Energy consumption: a country may choose to ban crypto due to environmental concerns.
What does banning crypto mean?
Banning crypto isn’t binary, it’s a spectrum. A country can ban:
- Crypto as legal tender.
- Mining of crypto.
- Crypto exchanges.
- Banks from holding cryptocurrency.
- Ownership of crypto.
China banned crypto in phases and now has the strongest ban. First, it banned financial institutions from engaging in crypto. Second, it prohibited mining of crypto and finally, it banned the ownership of crypto outright.
So why is it difficult?
It’s difficult to ban crypto because it is code that lives on the internet. If you live in China, you can buy crypto using a virtual private network (VPN) and using an exchange like Binance or Coindesk. Separately, banning cryptocurrency might actually promote it. The thesis of crypto is decentralisation. Banning crypto is merely proof that a country wants centralisation and control over the ability for its citizens to transact.