On Tuesday, Sen. Banking Committee Chairman Mike Crapo said at a hearing on the digital currency and blockchain regulatory framework that the US could not technically ban Bitcoin, given that Bitcoin is a global innovation. However, in theory, there are some ways to kill Bitcoin. However, perhaps the United States simply did not want to kill Bitcoin in the past.
American politician's consensus: Bitcoin can't be killed
On Tuesday, the US Senate Banking, Housing and Urban Affairs Committee discussed blockchain and cryptocurrency regulation. Chairman Mike Crapo said that it is almost impossible for the United States to ban Bitcoin. He says:
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"If the United States decides – I am not saying it should – if the United States decides not to see cryptocurrencies in the United States and tries to ban it, I am pretty sure that we will not succeed because it is a global innovation."
Earlier this month, Congressman Patrick McHenry told CNBC that the government had no ability to kill Bitcoin.
In fact, Satoshi Nakamoto, the creator of Bitcoin, has expected potential interference from the government. The blockchain technology that supports Bitcoin includes a global network of millions of nodes that will hardly be destroyed as long as there is no problem with the Internet.
For Facebook's Libra, the US government has more control and can prevent its release. But even if it goes online, Libra's blockchain will be a licensing chain that will only contain 100 nodes representing large companies.
In reality, the United States seems to be able to destroy Bitcoin
However, in theory, bitcoin is not incapable of being destroyed, and some governments may prohibit citizens from using it. Countries with underdeveloped Internet infrastructure can shut down the network directly. Last month, the Internet was broken in Sudan for several weeks. The government deliberately cut off the Internet to stop local protests, but it can use the same strategy to ban the use of cryptocurrencies.
Despite this, only some governments will take such drastic measures. The United States will not.
If the US government really thinks that Bitcoin is a threat, they will choose to use it and buy it. American economists and cryptographers are always experimenting with emerging phenomena to predict their potential direction and impact. In his book "Currency Wars: The Formation of the Next Global Crisis," James Rickards explains how he is involved in the US government's currency war simulation program to understand the potential impact of various monetary strategies.
The US government may purchase all available BTCs
It is hard to believe that the US government and intelligence agencies do not understand the potential of Bitcoin. The FBI banned the Silk Road (the black market shopping network, using bitcoin transactions) as early as 2013, so the US government knows the threat of decentralized currency. If it really wants to kill Bitcoin, the government can buy all available bitcoins through its agents, which had a market capitalization of only $1 billion.
Even if the market value of Bitcoin now exceeds $175 billion, the United States can buy and buy. Excluding those that have been lost and Hodler's death, the government needs about $100 billion to stop this "threat" called bitcoin. The $100 billion figure is huge and sounds like a whimsical. However, in 2008, the United States spent more than $700 billion on bank bailouts, while the Fed invested trillions of dollars in its quantitative easing program (Q1, Q2, Q3).
If you can't beat them, join them.
So why is Bitcoin still there? Ok, because the US government doesn't really care. Perhaps Bitcoin stems from the sincere intention of subverting traditional finance, but in fact it helps the dollar cope with its inflation and turns to a new financial system around the central bank that issues digital currency.
The dollar has the status of the world's reserve currency. According to the Bretton Woods Agreement, as of 1971, the dollar was supported by gold at a price of $35 per troy ounce. But it does not prevent the Fed from printing money out of thin air. The United States always knows how to pass on inflation (mainly through generous grants such as the Marshall Plan Initiative).
After the Nixon Shock (the collapse of the Bretton Woods system) in 1971, the dollar became a free floating currency as the gold standard was lifted. However, the United States has reached an agreement with Saudi Arabia (and other OPEC countries) to sell its oil only in US dollars. This helped the dollar ensure its global demand, enabling the US government to continue printing banknotes out of thin air.
Those countries that openly dare to sell oil in other currencies than the US dollar seem to have no good endings. The key is that every once in a while, the United States needs a new market to pass on its dollar inflation. In other words, it must ensure that the dollar needs to continue printing, so that it does not devalue its currency. The collapse of the Soviet Union, as well as different wars, also allowed the United States to flood these markets with dollars.
Bitcoin increases dollar demand
Bitcoin is another market that attracts a lot of dollars. Therefore, it can help the United States reduce some inflation and let the Fed continue to print money. At the same time, as cryptographer Willy Woo pointed out, institutional investment has had a negative impact on bitcoin price behavior. In fact, if only a few people control the supply of BTC, they cannot make Bitcoin a good medium of exchange.
However, this may be the final stage of this approach in the United States, as the world is turning to digital currency. On Sunday, Agustin Carstens, head of the Bank for International Settlements (BIS), told the Financial Times that the central bank will issue digital currencies earlier than we thought.
The central bank has long anticipated this shift. Bitcoin is helping the dollar achieve a smoother transition.