Ten years ago, cryptocurrency was a fringe concept. Few in the mainstream financial industry thought it would catch on, and even the most optimistic did not predict the role cryptocurrency would play in the world economy.
Today, there are more than 18,000 unique cryptocurrencies, and as of November 2021, the total value of all Bitcoin exceeded $1.03 trillion. For context, Meta (Facebook) has a market cap of $617.83 billion, and Amazon’s market cap is currently $1.69 trillion.
Cryptocurrency – Bitcoin, in particular – has become such an important component of the financial system that countries around the world have realized it is time to define their relationship with digital assets. This has resulted in crypto-specific legislation that is intended to reign in – or expand – the previously unregulated industry.
One of the biggest moves came from El Salvador, which decided to elevate the position of Bitcoin in its national economy. In September 2021, El Salvador was the first country to recognize Bitcoin as legal tender nationwide.
What Countries Have Banned Bitcoin?
El Salvador might have been the first nation to unequivocally embrace Bitcoin, but the other end of the spectrum – restricting or banning Bitcoin and other cryptocurrencies – is far more common.
Countries that have restricted or banned cryptocurrency include the following:
- Algeria – Illegal to use, hold, buy, or sell virtual currencies as of 2018
- Bolivia – Full ban on Bitcoin and other unregulated currencies as of 2014
- China – After years of tightening regulations, transactions involving Bitcoin and other cryptocurrencies were fully banned in 2021
- Colombia – Financial institutions were banned from all things Bitcoin, including investing, brokering, or managing virtual money operations as of 2014
- Egypt – In 2018, a religious decree was issued advising that Bitcoin transactions are prohibited under Islamic law
- Indonesia – Bitcoin and other cryptocurrencies are banned as a means of payment, effective 2018
- Iran – A complex set of regulations permits Bitcoin mining under certain circumstances while prohibiting transactions made with cryptocurrencies mined elsewhere
- India – Generally, lawmakers frown on the use Bitcoin, but to date, they have not passed a full ban though it may be coming
- Iraq – Full ban on Bitcoin and other cryptocurrencies as of 2017
- Kosovo – Ban on cryptocurrency mining, though not the currencies themselves, due to the strain mining puts on energy infrastructure
- Nepal – Full Bitcoin ban as of 2017
- North Macedonia – The only Northern European country (so far) to ban cryptocurrency
- Russia – Working to better regulate taxation and trade of cryptocurrency with new laws introduced in 2020; Russian civil servants are banned from owning crypto-related assets
- Turkey – Banned use of Bitcoin and other cryptocurrencies to purchase goods and services as of 2021
- Vietnam – Permits holding and trading Bitcoin but prohibits the issuance, supply, and/or use of cryptocurrency as a form of payment
From a cryptocurrency user’s perspective, Bitcoin and other options are appealing because they are unregulated, decentralized, and completely anonymous. Governments tend to oppose cryptocurrency for those very same reasons. After all, assets that can’t be tracked can’t be taxed, and they can be used to facilitate criminal activity.
Can The Government Shut Down Bitcoin?
As more legislative bodies take on the complicated task of managing this new type of asset, some wonder whether Bitcoin could be outlawed in the United States.
On March 9, 2022, the Biden administration issued an Executive Order on Ensuring Responsible Development of Digital Assets to establish its position on this topic. In short, the government doesn’t intend to shut down Bitcoin, but it does want to take a larger role in the crypto economy.
Essentially, through the Executive Order, it is clear that the United States government is reasonably supportive of the various components that make up the crypto ecosystem. This includes digital money like Bitcoin, digital wallets, non-fungible tokens (NFTs), and the assorted platforms that permit users to buy, hold, and trade these assets.
Rather than making changes to whether and how digital assets are managed in the United States, the Order sets out the nation’s strategy for dealing with the risks that come along with cryptocurrency and crypto infrastructure.
The Executive Order notes that the country’s goal is both to “protect consumers, investors, and businesses in the United States” and “support technological advances that promote responsible development and use of digital assets.”
In other words, the Order says that there is a need for balance. While the United States wants to be a leader in financial innovation and encourage financial efficiency, it is also critical to prevent abuse by individuals and businesses and avoid the use of cryptocurrency to promote illegal activity.
In an effort to find that balance, the Order outlines a new research initiative that will require cooperation from a long list of federal agencies.
The report, due 180 days from the date the Order was issued, will cover the following topics:
- How money and payment systems will function in the future
- What conditions promote widespread adoption of digital assets
- How innovation in the tech sector may impact these outcomes
- How the growing popularity of cryptocurrency may impact the US financial system
- What efforts are needed to modernize current payment systems
- How digital assets impact national security, financial inclusion, and economic growth
- Whether and how various approaches might increase or decrease the use of cryptocurrency for illegal purposes
The purpose of answering all of these questions is to measure the advantages and disadvantages of creating a United States Central Bank for Digital Currencies (CBDC). The final report is expected to outline options for structuring such an institution and the pros and cons of various designs.
Some of the key players in this research initiative include the Chairman of the Federal Reserve, who will be expected to weigh in on the implications of digital assets in terms of its ability to set monetary policy for the country. The Attorney General is tasked with examining how current laws apply to the digital financial world, as well as what new legislation would be necessary to implement a CBDC.
The bottom line is that though it is theoretically possible for the US government to outlaw Bitcoin, there is no reason to believe that is part of a long-term plan. Instead, like other nations, the US is carefully reviewing the opportunities and threats posed by Bitcoin and other cryptocurrencies.
It appears that once complete, the research will be used to build a balanced regulatory environment that promotes technology while protecting consumers and investors.
Is Bitcoin A Good Investment?
Since its launch, the value of Bitcoin has grown by roughly 13,895 percent. Approximately 3,760 percent of that growth occurred in the past five years. However, given its decentralized nature, Bitcoin doesn’t necessarily move in expected ways relative to larger market conditions. Historically, cryptocurrency has been an extremely volatile investment.
With that said, it is clear that Bitcoin isn’t a passing fad. Global use is growing at a rapid rate. That means, despite its inherent risks, Bitcoin may be a good investment for those that can tolerate frequent, dramatic drops in value and wait patiently for Bitcoin price to recover.
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