By many, Bitcoin is considered a viable alternative to the corrupt central banking system. Indeed, it has the potential to circumvent the centralized financial system. The very system that is the lifeblood of governments running on evermore bloated budgets. Cryptocurrencies have become a cardinal threat. And this is why we are getting to the point where their demise is almost inevitable. We will likely see Bitcoin limited in quite the near future to sparse black market transactions.
People who claim that Bitcoin is an excellent tool of rebellion against the ever more totalitarian government need to realize how the government always dealt with any uprising. The cases of Edward Snowden, Julian Assange, and Hong Kong protests show that it rarely abstains from the use of a garnered monopoly on force to silence its opponents. The ability to finance its activities by inflating the money supply is a crucial dominance instrument over its citizens. No longer is it reliant on collected taxes. There is no limit on spending. The value of savings and incomes erodes to fuel the never-balanced budget of the state. Why would the politicians give up their fundamental source of control? They especially cannot allow a decentralized alternative to their official currency, while central banking got us to inflation above 8 percent in the EU. This is the worst time of all for the undermining of the legal tender.
Cryptocurrencies are a great alternative to avoid the control of the state; however, they are not perfect. If you think that the government cannot make Bitcoin illegal as this would be a breach of civil or human rights, you need to consider what happened in 1933. In that year, Roosevelt made gold ownership illegal. By a single act, the president broke every contract in
the United States secured by the ability to exchange every single dollar into gold. And people, in a massive majority, complied with the government mandate to avoid 10 years of imprisonment and confiscation of their life savings. How high the punishment must be for the risk of owning Ethereum or any other cryptocurrency to not be worth it? The legislators will
set a sufficiently high jail time, to discourage anyone but the few utmost ideologically driven.
There are no boundaries for our dear leaders. There was no way to protect your wealth from the ever-greedy government ninety years ago. Even now, anyone refusing to use the United States’ only legal tender will face severe punishment. State terror is an underestimated instrument. And thus, Bitcoin will probably soon become another victim of its ruthless force.
Do you trust the politicians in Washington DC and Brussels to not act in their best self-interest because you have a right to privacy or free-market exchange of digital assets? Libertarian voices hammering home the point that code is covered by freedom of speech will likely be ignored.
Most versions of Bitcoin bought by the average citizen are not decentralized. Custodial platforms collect full data on how much cryptocurrency is owned and transferred between users. Only a blockchain wallet allows you to protect your digital assets fully. The password could keep decentralized versions of cryptocurrencies away from the government; however,
they can become useless if a government blocks their real-world usage. If you cannot buy official currencies or exchange Bitcoins for tangible goods and services, they become worthless. In his four-hour-long conversation with Lex Friedman and Michael Malice, Yaron Brook points out that the possibility of blocking any practical use of Bitcoin is absolutely
within the capabilities of a state. “It is true that we can exchange Bitcoin, and the government would not know that we did. But
once he is advertising on his website that he accepts Bitcoin or once he tries to turn his Bitcoin into particular goods, once you manifest it in the physical world the government will step in. They can do that, and you will not be able to sell it. “
Suppose you need to access your blockchain wallet with thorough measures to protect your privacy and make exchanges on the black market under the threat of severe punishment. In that case, the use of Bitcoin en masse will be vaporized. The hope of reaching a critical mass and stabilizing its price so that it can hold value over time will be gone. Most people do not
even put in the effort to cover their computer camera, so expecting them to follow detailed procedures to not have their cryptocurrency purchase tracked is a lost cause. Cryptocurrencies do not seem to be an area that could garner massive civil disobedience in defiance of state regulation.
Since the publication of that podcast, the government showcased the capabilities to enforce the prohibition on usage of Bitcoin-related technology. On the 8 th of August, Dutch authorities arrested a suspected developer of Tornado Cash, while the United States added it to their sanctions list. Tornado Cash is a key tool that allows for anonymizing cryptocurrency users’
spending and prevents tracking of transactions. Funds of multiple users are scrambled together and mixed, allowing for better privacy protection. Thus, outlawing the cryptocurrency mixing service brings the potential of severe consequences for US citizens, residents, and companies, large enough to discourage them from the usage of the tool. A similar procedure
can be applied to Bitcoin outside of custodial platforms with verified identities of users, and there is little any single person can do in the face of such regulation, other than comply.
The widespread use of Bitcoin has also brought one more worrying government response. The Federal Reserve and European Central Bank are undertaking work on their own version of a digital currency. And unlike Bitcoin, this one will likely be heavily centralized and strictly controlled. Also, unlike Bitcoin, its supply will not be limited. It could allow the government to
create fictional money without even printing a single banknote. The final rendition of the inflationary monster could be released on our economy. Even worse, this could give the bureaucrats the ability to ultimately end all cash transactions and control absolutely every aspect of your spending. And a digital currency could allow central banks to force you to
spend all your income immediately: for instance, by setting an expiry date on the money you have. The Keynesian dystopia of immediate injections into the economy could be realized in quite the near future.
Some Bitcoin enthusiasts point out that the worries about central digital currencies may be overblown. Despite the dramatic announcements made by Christine Lagarde or Janet Yellen, the work on the digital euro or digital dollar seems to be in the beginning stages. It could be possible that bringing to life such a system may be beyond state power. Once again government incompetency may be our saving grace. But it is also possible that in a few years, we will be forced to use digital euro in all daily transactions.
What would happen to Bitcoin in such a case? The government hates competition. An independent cryptocurrency – protected against inflation – roaming free in the financial sphere is quite the threat to a central bank digital currency. So as soon as they are ready to implement their worthless digital currency, the government will use its power to eliminate all
alternatives. Not much is needed to motivate such legislation. The next big scandal similar to the fall of Sam Bankman-Fried’s FTX, could be enough of a pretext to pass the convenient legislation. To the critics of cryptocurrencies, it is of little concern that SBF’s fraud was just about embezzling customer deposits and had little to do with crypto.
Let’s enjoy Bitcoin while we have it, but perhaps a person skeptical of their government should not hold on for dear life to crypto assets in the hope of them going to the moon, as they are likely to go on a journey to the center of the earth in the near future.
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