States Will Ban It

Often the three previous FUD arguments are followed by this one. It is a tool for criminals, therefore the State will eventually ban it. It is a Ponzi scheme, therefore illegal, so they will ban it. Or alternatively, it is very bad for the environment so they will end up banning it.

We have already seen that it is not especially useful for criminals, that it is not a Ponzi scheme in the slightest, and that far from being harmful to the environment it is in fact very beneficial. But it is true that none of this prevents governments from wanting to ban it. And there is a kernel of truth in this criticism: certainly some governments would like to ban it, especially the more authoritarian ones with a tendency toward central planning. The reason they would ban it if they could is that bitcoin strips them of the enormous privilege the fiat system grants them: the power to create money out of nothing. Money that the rest of us can only obtain through our labor and effort. But of course, they cannot say this openly. They need to spread all kinds of FUD to turn public opinion against it. All the foregoing arguments that are not true are excuses they use in an attempt to slow its expansion.

As we saw in the first part of the book, the ability to create money out of nothing is an enormous privilege that divides society into masters and servants. It is impossible to overstate its implications, since it permeates every aspect of our life in society. The fiat system has reintroduced serfdom, giving rise to a new feudalism. An invisible semi-slavery in which the chains are not made of steel but of debt. A prison in the shape of a virtual hamster wheel in which we must keep running without stopping, with no real possibility of escaping it, since the option of saving for the future does not exist.

The only mistake in this criticism is simply the verb tense. The conditional would be correct, but not the future. They would ban it, without a doubt, if they could. But they will not ban it because they have no effective way of doing so. A State cannot ban bitcoin, in general. It can prohibit its citizens from using electricity to mine, it can make exchanges illegal, and a few other things. But can it prevent a citizen from flipping a coin 256 times and writing down the result? No. Yet that result is a private key, and with it the citizen can calculate the corresponding public key and address, and anyone can send them money from anywhere in the world, without asking permission from anyone.

Could they ban the mere possession of bitcoin? This is where things start to get interesting, because in bitcoin, ownership and knowledge are indistinguishable. And this is not a metaphor --- it is literally true. When we say someone has bitcoin, we are not strictly speaking correct, because they do not have it in the conventional sense. What we mean is that they know the private key with which they can sign a transaction spending those bitcoin. But if that person never uses that knowledge, they have nothing --- exactly the same as anyone else who does not know that number. In fact, if that person dies, their heirs have nothing, and no one can do anything to change that. Nor can the State assign them that inheritance because it legally belongs to them. This is so because the person who died did not have --- they knew. And knowledge cannot be inherited. So what exactly are they going to ban? Knowledge? The number itself? Will there be illegal numbers? Completely ridiculous, absurd, and impossible to implement.

Some of those who argue that bitcoin will be banned focus on communications. Bitcoin is an internet protocol, and they believe governments can force internet service providers to filter and block it. Something like banning TCP port 8333 across the entire network. They tried to do something similar with BitTorrent and failed. That measure is easily circumvented, since it is possible to use a different port from the standard one.

They could go further and deploy firewalls capable of detecting the application --- then they could detect bitcoin’s communications on any port and changing the port would no longer help. But this would be enormously expensive for internet service providers and would not be effective either, because it is already possible to run a bitcoin node over TOR, a network that is fully encrypted. So, are they going to filter all encrypted traffic? Goodbye to communications with our banks, and to more than 90% of internet traffic? The definitive death of privacy and the establishment of Big Brother? Although some Western democracies seem to be heading in that direction, I hope they do not succeed. In any case, what seems very unlikely is that every country in the world would agree to do it simultaneously.

There is no way to ban bitcoin except in a fully Orwellian state, but rather than a globally synchronized Orwellian scenario, the most likely outcome is that when some governments try to ban bitcoin, all they will achieve is slowing its adoption among their population. And those who gradually embrace this new money will find that the more widespread its use becomes and the further their population moves away from the fiat system, the greater prosperity the country achieves --- something that has already begun to happen. El Salvador led the way by adopting bitcoin as legal tender in 2021.

A country can make the transition to bitcoin smoothly, if a sufficiently large segment of the population realizes this and demands that politicians accept the separation of money and the State, or more contentiously, if politicians resist giving up the immense power that creating money out of nothing grants them. In this regard, the decision is easier for countries such as Ecuador, Panama, East Timor, or Zimbabwe that use the US dollar, or the 14 African countries that use the CFA¹ — since they do not need to decide to abandon a currency that they can create out of nothing. They only need to decide to abandon a currency that another country can create out of nothing.

Whatever path we take, the long-term future is the same: the separation of money and the State. What is at stake in the coming decades is whether it happens smoothly or with tensions and governments fighting against privacy and freedom. If a critical mass of the population in a democratic country demands bitcoin-friendly regulation from their politicians, and is willing to vote for the party that most clearly commits to bitcoin adoption, everything will be much easier --- since politicians do not want to alienate a significant percentage of the population. If, on the other hand, this does not happen, the government of the day will continue fighting bitcoin using all the disinformation we are refuting in this book and whatever new forms they invent. And in the process, going down in history as the government that delayed the adoption of bitcoin and with it progress, individual freedom, and civilization.