Jon argues that Bitcoin was designed to operate ‘underground’ and that any ban would only draw a large amount of attention to the currency serving to strengthen it. “The demand for an item, in this case digital cash with user-defined levels of privacy, does not simply evaporate in the face of a jurisdictional ban.”
After all, since when has banning things actually worked??
“I maintain that a government ban on bitcoin would be about as effective as alcohol prohibition was in the 1920s. Government prohibition doesn’t even do a good job of keeping drugs out of prisons. The demand for an item, in this case digital cash with user-defined levels of privacy, does not simply evaporate in the face of a jurisdictional ban. One could even make the case that it becomes stronger because an official recognition that Bitcoin is not only a “renegade” currency but a “so-effective-it-had-to-be-banned” currency would imbue the cryptographic money with larger than life qualities.”
“The under-banked people of System D would awaken to using bitcoin for eliminating onerous fees or the risk of handling cash. The individuals seeking drugs without violence or prescriptions would understand the imperviousness of sites like the agorist Silk Road. The anti-banking crowd would race to get their hands on some bitcoin as a symbolic gesture to weaken bankers’ firm grip on payments. The pro-gambling casino people would all of a sudden realize how play money bitcoin bypasses the ridiculous and religious anti-gambling laws. The asset protection wealth managers would start to become fascinated with esoteric things like deterministic brainwallets and Tor.”
“One doesn’t drive Bitcoin underground. A free Bitcoin was designed to be ‘underground’ for its own survival otherwise it wouldn’t need such an inefficient, decentralized block chain. The low-cost and non-reversible bitcoin transactions that appeal to mainstream commerce are merely byproducts of a mutinous system that doesn’t rely on trusted third parties.”
“Prohibiting bitcoin is the opposite of what a rational game theorist would conclude. But are our regulatory overlords smart enough to advocate a hands-off policy? If the State cannot plausibly ban bitcoin, why would they want to give it the additional power to grow and propagate?”
“Their best response to Bitcoin is irrelevancy, or failing that, extreme gold-like market manipulation for as long as possible. The end game for the State is perpetuating the fiat myth — their fiat myth not the populace’s cryptographic Bitcoin myth.”
Read the post in its entirety here.