The latest news of Charlie Munger proposing that the U.S. should ban crypto got me thinking...
What would happen if the U.S. government did decide to ban cryptocurrency, like China did? This has been a primary argument of crypto critics from the beginning. That if Bitcoin or crypto became too much of a threat to the financial system, governments would simply ban it.
And this makes sense, from a traditional finance perspective, where the government has complete control over banks and other financial institutions. The problem is, true cryptocurrencies are engineered to be geographically decentralized, and the world doesn't operate under one legal jurisdiction. Even nations themselves have become more divided over the past few years.
For example, the once "United" States of America are not so united anymore. We see certain states, such as Wyoming, Texas, and Florida, taking a much more friendly stance to cryptocurrencies than the others. So even if the federal government were to declare crypto illegal, would all 52 states abide by the law? Doubtful. Even if some states were to follow the order and make crypto transactions illegal in their jurisdiction, would every single city in that state abide by the rule? Unlikely.
Across the globe, many countries, states, and cities have recognized the opportunity that crypto presents. Nations like El Salvador and Central Africa Republic have already made Bitcoin legal tender. Meanwhile Venezuela, Brazil, and parts of Honduras are allowing crypto to get a solid foothold. Cities like Miami, New York, and the Swiss city of Lugano have made announcements that they want to be leaders in the crypto space.
Those countries that choose to outlaw or regulate crypto will see exchanges, entrepreneurs and investors leave for more crypto-friendly nations. For example, We saw exchanges move to neighboring countries like Japan and Korea after China declared crypto illegal. Bitcoin miners then moved to the USA and other areas.
I suspect that these "currency wars" will last years, possibly decades, as traditional nation states attempt to roll out their CBDCs. They may deem public cryptocurrencies illegal, considering that they are censorship-resistant and provide the people with a valuable alternative. However, in the end, public cryptocurrencies will win out because governments simply cannot match the competition of exponential grassroots communities.
In the long run, cryptocurrency is going to change the way we govern ourselves. Governments as we know them today may not exist a few decades from now. Similar to how the Internet has essentially replaced old telecommunications lines and cable TV, cryptocurrency will replace national currency and voting stations.
As some regions close their doors to crypto, other regions will open theirs. The areas that are pro-crypto will prosper, and the regions that had banned crypto will eventually see the benefits and re-open themselves to it, and the revolution of public blockchains will inevitably continue.
Aside from causing temporary market corrections, do you think governments will be able to successfully ban or regulate cryptocurrencies?
Image source: https://cryptogemsofficial.com/billionaire-investor-charlie-munger-reiterates-us-should-ban-bitcoin/