Why governments haven’t banned cryptocurrencies yet?
“If our government can be likened to a parent then it would be that sort of a parent who would want to accompany you in your honeymoon.”
- some author of a live mint article
I am an Indian and we Indians know that the our administration has a great affinity for using “bans” as the silver bullet solution to every problem they encounter. Be it the kind of electronic equipment one can import or the kind of stickers you can put on your vehicle, they have it all figured out and if you happen to do something they missed, you have either broken the law or are at the mercy of the official. The situation isn’t that different elsewhere as well. Yet these governments (except China which already banned) have maintained some sort of neutral approach with cryptocurrencies.
Governments have power solely because they have power over their fiat currencies. Even physical power is secondary to this. Take for instance you want to transfer some Indian Rupee (INR) for a purpose which the government does not approve. It is fairly easy for them to prevent you from doing that since transfer of fiat currency can take place only either physically or through institutions which the governments have absolute control over. And in today’s world, all governments, democracy or not, are fundamentally, a group of unproductive individuals who control and exploit a vast majority of productive citizens for the gains of themselves and their accomplices. They regulate the resources which they extracted from their citizens to give you the illusion that governments are relevant but majority of the population fail to realize that these resources belonged to them in the first place. This is the accepted reality of the modern era. And technologies like cryptocurrencies have the power to change that. But if you are a government, stopping this financial revolution, which is around the corner, is not as easy as it sounds and that is why governments across the world are not reacting drastically to this menace which threatens the very existence of their class.
For example, imagine that the government of India decided to ban cryptocurrencies from tomorrow. This can potentially accelerate the transition of cryptocurrencies from being a digital asset to a transactional currency.
Many businessmen in certain African countries with dysfunctional financial institutions are already using Bitcoin as a currency. The only reason you and I are not using them is because we are familiar with fiat currency and have more or less accepted it’s disadvantages (taxation and government control) as something that is part of life. Because nobody can technically stop a person with access to a computer and a network of other computers (…consciously not using the term internet as Internet can potentially be regulated as this “war” of governments against their citizens progresses…) from creating a new cryptocurrency. Even if it is legally banned, is very hard to enforce.
A new parallel economy will emerge where the local grocery seller is willing to sell me a bag of wheat for exchange of a cryptocurrency. Why would he do that? Because his wholesale dealer was willing to exchange him wheat for the same. You might think this is unrealistic but I think this is inevitable because of the huge incentives to do this — zero TAXES. I know what you are thinking. Without taxation how can public services be provided? If this system takes off we will witness private players, in almost every aspect which today are a monopoly of governments. They will be regulated by local and community based administrations of a particular region. This new world will be highly interconnected while at the same time will be highly localized when it comes to daily governance. We will witness every governmental process, which are currently the monopoly of government servants and which are opaque, being done through public blockchain based systems which will usher in a new era of transparency. These independent self-governing communities will still pool-in their resources to build and maintain infrastructure like satellites but national boundaries and strongman autocrats like Modi, Xi-Jin Ping and Trump will become an artifact of history just like medieval kings or dinosaurs.
In my opinion, it takes just a single commonly used commodity to be transacted through the exchange of cryptocurrencies, to start this avalanche of financial revolution. And I am guessing that if this revolution begins to happen, it will be one of those commodities which has a shorter supply chain with lesser players involved and that which requires some level of modern computer education, which will be the first ones to adopt this new method (eg: IT services or other ITeServices).
People will start getting the same amount of a commodity for half the work (price) because the overhead of government extraction in the form of taxes is now eliminated. Inherent value of commodities and the effort put in to produce them are constants and real and hence same commodity can be bought for lesser effort. Eventually the volatile nature of this cryptocurrency will stabilize and become widely adopted.
When it comes to having an “inherent value”, cryptocurrencies are no different from a currency note of a fiat currency. A 500 rupee note or a 20 dollar bill has value because you can buy stuff which has inherent value with it. Cryptos will also gain value once this takes off.
Does that mean that the governments’ hands are tied? No and they have a better chance at winning this if they act smart and fast.
If this actually starts happening, the governments might begin with drastic measures like heavily regulating the internet and mandating new communication protocols for the IT infrastructure of a country. But theoretically that can’t stop this revolution once it has started because once sufficient number of people have realized the benefits of conducting their economic affairs in this manner. This is because there is enough incentive for them to do something like (for instance) create makeshift devices which connects with existing computer devices over USB or other means and enables communication with each other nodes radio transmissions, circumventing government restrictions.
But the government might still win this war against their own people if they go ahead and heavily regulate the supply chain of smart digital (silicon based) equipment which are at the core of this revolution. But it becomes progressively more difficult for the government to win as more and more verticals like transport, food, clothing etc., become integrated into this. Because at the end of the day it is “people” who work in all these sectors and “exploitation by the ruling class” is the one thing that unites them all. Only time will tell what will happen. Maybe the governments will win and start heavily regulating the Information Technology sector which is made this revolution possible.
However the governments have a higher chance of succeeding if they become successful in introducing rogue players into this public ledger system who act with the objective of destabilizing the cryptocurrency making it more volatile and unreliable. With this act they might succeed in making the common man lose trust in this new system and make him reliant on government controlled fiat currencies once again. And if they fail, we might very well be headed towards a new world which is free from draconian authorities where new forms of governance and fair ways of conducting societies awaits us.
Coming back to our question: Why are governments across the world hesitant to act upon this? Because they are afraid that a wrong move like a ban can potentially provoke an avalanche of change in the way their subjects (citizens) interact with each other without the need of the financial institutions they can control. For now, they are trying to tame this beast by spreading propaganda and doing everything possible to ensure that the average citizen is kept away from this while at the same time making sure that the fringe subgroup is discouraged in every way possible. Once the common working individual adopts this, there is very less chance that the government might still win against this fight for freedom.
Will the current blockchain hype take us to this utopia?
Probably not. I don’t think the level of awareness of the average citizen across the world is ready for something this good. I think there is a high chance the governments might win this time. But WE will eventually win and these technologies will be pivotal to that change. I am hopefully waiting for that day.