Bitcoin of America: Why the United States can't ban Bitcoin
in Bitcoin (BTC)
There is a fear among some in the cryptocurrency community that the United States government will ban Bitcoin (BTC). Banning BTC might have been possible in 2014 but based on how much adoption Bitcoin has now, a ban is unrealistic.
Millenials Wouldn’t Stand for it
Financially speaking, millennials have had it tough. First, the GFC (Great Financial Crisis) slowed the economy and led to prolonged unemployment.
The recovery from the GFC took longer than usual. By the time the economy got back on its feet, it was just a few years until the Coronavirus appeared on the scene. Once again, unemployment is up, the economy is down, and the road to recovery looks like it’s going to be long and slow.
As brutal as recessions can be there is at least one silver lining: lower asset prices. Lower priced assets like stocks and real estate give younger generations, with less purchasing power, a chance to invest at a fair price. Unfortunately, thanks to the Federal Reserve printing trillions of dollars, asset prices in the USA have not gone down and stayed down.
That’s good for everyone who owns assets; however, it means that millennials have never gotten a chance to buy an affordable house or buy stocks at a low valuation. The result has been social unrest and an outpouring of frustration from an entire generation who feel that they’ve been dealt a bad hand.
Against this backdrop of record-high valuations, there is one opportunity to get ahead: Bitcoin. BTC is the one asset that millennials can invest in. It’s an asset that has traditionally offered tremendous returns, and it’s a chance for millennials to make up for lost ground.
So if the government bans Bitcoin, it would be like yanking the last tattered shreds of the rug from under the feet of the young. You can’t buy stocks at a fair value, you can’t afford a house, the job market is in the drain and now, on top of all of that, Bitcoin is off the table as well.
The reaction would be tremendous. Many people don’t know that millennials are the largest generation in the United States and have the greatest voting power.
If the government banned Bitcoin, it could be a catalyst to get millennials to vote those politicians out of office who enacted that legislation. Out with the old, in with the new. Politicians are aware of this dynamic. They’re also aware that proportionally the millennial generation gets larger every year, giving them more power.
If politicians want to keep their power, which they seem to want to do, they’re unlikely to pass a law that would ban an asset that’s popular with the USA’s largest voting block.
Politicians Won’t Hurt their Friends
Who do politicians love? Their campaign donors! Who donates more money to Washington than just about anyone else? Wall Street!
The more that Wall Street gets involved with Bitcoin, the less likely politicians will ban it. If politicians tried to ban an asset that Wall Street is making money with, the lobbying efforts would be huge. The following list offers just a few examples of people and organizations who would lose if BTC is banned.
- Square, a publicly-traded company, added over 4,500 Bitcoins ($50,000,000 at time of purchase) to its portfolio
- PayPal is integrating Bitcoin and other cryptocurrencies into its platform
- The billionaire Paul Tudor Jones who has very methodically laid out his case for why he’s invested in Bitcoin
- The publicly-traded company MicroStrategy, which has bought nearly half a billion worth of Bitcoin
- Asset manager Fidelity has built out an entire crypto service, offering Bitcoin custody and OTC sales
- The CME has a very popular Bitcoin futures product that routinely does $500 million a day in volume
- ICE, the parent company of the New York Stock Exchange, has created the Bakkt Bitcoin platform which is starting to become quite popular and gain more adoption
- Institutional Money continues to pump BTC
These are some of the prominent examples that we know about. Who knows what other wealthy investors have privately taken a stake in Bitcoin. Or what Wall Street firms are building out crypto products.
If there is one thing the last twenty years has shown us, it’s that Wall Street has a lot of influence over the government. If they say that they don’t want Bitcoin banned, it’s likely that Bitcoin won’t be banned.
Taxes, Taxes, Taxes
As Lyn Alden has pointed out, the United States has reached a point of no return in terms of its debt. Once a country crosses the 130% ratio of debt to GDP there is no going back; default is inevitable. That default can come in two forms.
- Real default, where the government says to investors, sorry, but we won’t be paying this back
- Nominal default, where the government devalues the currency (inflation) and pays back the debt in full with a significantly devalued currency
Most governments choose nominal default; it’s just easier. That’s the most likely outcome for the United States as defaulting on treasuries in real terms would wreak havoc on the global financial system. However, while the government inflates away the debt, they’ll also be looking for other ways to pay it off. That means taxes.
Once politicians start raising taxes, they’ll also be looking for every source of revenue they can find. While the cryptocurrency industry isn’t huge, it’s a growing industry. It gets larger every year and more people invest in Bitcoin every year. Whenever an industry is trending up, tax revenues go up as well.
The United States government would have to be tremendously foolish to ban a growing industry that’s paying more and more taxes every year.
The Fourth Reason
We’ve listed three reasons why the United States government is unlikely to ban Bitcoin anytime soon but there’s also a fourth reason: there just hasn’t been any real indication that the government wants to ban Bitcoin.
Sure, there are a couple of senators who don’t like BTC. They bang their fists on the table and say that Bitcoin must be banned because it’s used for money laundering or whatever else (the irony).
However, in terms of actual legislation with widespread political approval, it hasn’t happened. Banning Bitcoin would be a big deal, and it wouldn’t happen overnight. There would be lots of discussion, and the arguments, both for and against the ban, could go on for months or even years. There would be plenty of warning that a Bitcoin ban was coming, and we just haven’t seen anything like that happen yet.
For now, it looks like Bitcoin is safe in the United States. That’s good news for investors and, frankly, good news for the world. In times of increasing uncertainty, it’s good to know that there is a permissionless, decentralized currency that’s out of reach of central banks and their tireless printing presses.
This content is for informational purposes only and is not investment advice. You should consult a qualified licensed advisor before engaging in any transaction.