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Recently, I was named Most Viewed Writer on Bitcoin and cryptocurrency at Quora.com (writing under the pen name, “Ellery”). I don’t typically mirror posts at Lifeboat, but a question posed today is Quora_Most_Viewed_splashrelevant to my role on the New Money Systems board at Lifeboat. Here, then, is my reply to: “How can governments ban Bitcoin?”

Governments can enact legislation that applies to any behavior or activity. That’s what governments do—at least the legislative arm of a government. Such edicts distinguish activities that are legal from those that are banned or regulated.

You asked: “How can governments ban Bitcoin?” But you didn’t really mean to ask in this way. After all, legislators ban whatever they wish by meeting in a congress or committee and promoting a bill into law. In the case of a monarchy or dictatorship, the leader simply issues an edict.

So perhaps, the real question is “Can a government ban on Bitcoin be effective?”

Some people will follow the law, no matter how nonsensical, irrelevant, or contrary to the human condition. These are good people who have respect for authority and a drive toward obedience. Others will follow laws, because they fear the cost of breaking the rules and getting caught. I suppose that these are good people too. But, overall, for a law to be effective, it must address a genuine public need (something that cries out for regulation), it must not contradict human nature, and it must address an activity that is reasonably open to observation, audit or measurement.

Banning Bitcoin fails all three test of a rational and enforceable law.

Most governments, including China and Italy, realize that a government ban on the possession of bits and bytes can be no more effective than banning feral cats from mating in the wild or legislating that basements shall remain dry by banning ground water from seeking its level.

So, the answer to the implied question is: A ban on Bitcoin could never be effective.

For this reason, astute governments avoid the folly of enacting legislation to ban Bitcoin. Instead, if they perceive a threat to domestic policy, tax compliance, monetary supply controls or special interests, they discourage trading by discrediting Bitcoin or raising concerns over safety, security, and criminal activity. In effect, a little education, misinformation or FUD (fear, uncertainty and doubt) can sometimes achieve what legislation cannot.

Reasons to Ban Bitcoin … a perceived threat to either:

  • domestic policy
  • tax compliance
  • monetary supply controls
  • special interests

Methods to Discourage Trading (rather than a ban)

  • Discredit Bitcoin (It’s not real money)
  • Raise concerns over safety & security
  • Tie its use to criminal activity

Avoiding both a ban—and even official discouragement

There is good news on the horizon. In a few countries—including the USA—central bankers, monetary czars and individual legislators are beginning to view Bitcoin as an opportunity rather than a threat. Prescient legislators are coming to the conclusion that a distributed, decentralized trading platform, like Bitcoin, does not threaten domestic policy and tax compliance—even if citizens begin to treat it as cash rather than a payment instrument. While a cash-like transition might ultimately undermine the federal reserve monetary regime and some special interests, this is not necessarily a bad thing—not even for the affected “interests”.

If Bitcoin graduates from a debit/transmission vehicle (backed by cash) to the cash itself, citizens will develop more trust and respect for their governments. Why? Because their governments will no longer be able to water down citizen wealth by running the printing press, nor borrow against unborn generations. Instead, they will need to collect every dollar that they spend or convince bond holders that they can repay their debts. They will need to balance their checkbooks, spend more transparently and wear their books on their sleeves. All good things.

Naturally, this type of change frightens entrenched lawmakers. The idea of separating a government from its monetary policy seems—well—radical! But this only because we have not previously encountered a technology that placed government accountability and transparency on par with the private sector requirement to keep records and balance the books. [continue below image]…

What backs your currency? Is it immune from hyperinflation?

What backs your currency? Is it immune from hyperinflation?

Seven sovereign countries use the US Dollar as their main currency. Why? Because the government of these countries were addicted to spending which leads to out-of-control inflation. They could not convince citizens that they could wean themselves of the urge to print bank notes with ever increasing zeros. And so, by switching to the world’s reserve currency, they demonstrate a willingness to settle debts with an instrument that cannot be inflated by edict, graft or sloppy bookkeeping.

But here’s the problem: Although the US dollar is more stable than the Zimbabwe dollar, this is a contest in relative trust and beating the clock. The US has a staggering debt that is sustained only by our creditors’ willingness to bear the float. Like Zimbabwe, Argentina, Greece and Germany between the wars, our lawmakers raise the debt ceiling with a lot of bluster, but nary a thought.

Is there a way to instill confidence in a way that is both trustworthy and durable? Yes! —And it is increasingly likely that Bitcoin is the way to the trust and confidence that is so sorely needed.

Philip Raymond sits on the New Money Systems board. He is also co-chair of Cryptocurrency Standards Association and editor at A Wild Duck.

I got this tweet today, as a part of a larger conversation that technological breakthroughs could help predict disruptive economic times. During the past 10 days or so, the US and global financial markets have taken a deep plung, as a result of, well, according to the CIOs (chief investment officers) and politicians, we don’t know. The new industry pins the almost unanimous economic decisions of sell sell sell, to the latest new is geo-political interactions and/or financial specific news.

We see headlines like “Downgrade Ignites a Global Selloff” at the Wall Street Journal, referring to the Standard & Poor’s downgraded credit rating of US treasuries, which by the way soared during the selloff of equities, because of their relative strength.

More importantly than what to buy, none of the headlines, nor the vague analysis captures the actual root-cause of this regular, or rather, irregular economic downturn occurring over the past decade. The general ideal that one should be able to buy low and sell high that once held true in the 20th century no longer exists. The root of the problem is in our use of technologies to error-proof redundant problems in the modern work world. Further, we know that mostly all errors exist by the hands of humans. Thus, error-proofing can be synonymous with human-proofing. We usually think of technologies that replace human activity as a device or software…”the robots”, and those do exist, but they are less of a threat than the methodological technologies.

We rarely think of a routine as a technology, but they are. Benchmarking is a technology. With all of the methodological expertise being poured into corporations over the past 30 years, we’ve finally got somewhere, efficient. How many times have you heard that word at the office? Since the late 1960s and the creation of Poka Yoke by Dr. Shigeo Shingo, and on to Lean-Manufacturing, and Six-Sigma, and most recently the 3rd version of IT Infrastructure Library (ITILv3), we are actively depleting the work force to ensure our qualitative (effectiveness) and quantitative (efficiency) superiority to the competition.

Its a difficult dialogue to have, because a valid argument is: what’s wrong with business being efficient? My answer would be: Nothing at all. The problem comes into play when human-kind has rendered its ability to distribute value, obsolete. In the past we’ve distributed value through a currency of some sort, and that currency (in primitive times and modern day) is backed by more than gold or bonds, it is also backed by faith in a philosophical system that a woman/man get paid for an “honest days work”, quite the primitive slogan. In a knowledge economy where people aren’t performing back-breaking work at the volumes that they used to, and 10 knowledge workers of the 1980’s can be performed by 1 Project Manager using 30 years of benchmarked data with soft/hardware help, it’s difficult to spread the wealth that we once did.

When the markets sell off equities into cash, they are saying that the economy is inflated and weak. There are no buyers for the products being produced, because there are no jobs. There are no jobs, because of all of the error-proofing that proceeded them; and finally, it is exceedingly difficult to quantify what people’s knowledge, experience, existence is worth in the old paradigm. While it feels better to point the finger at the CEOs and Politicians today, of which I’d likely get a finger or two, the problem is that we are trying to distribute the wealth that still exists using an antiquated model.

If one looks at the M1&M2 numbers at the US Federal Reserve, they’ll notice that all of the money we need to fix/build anything still exists. This is the same across the globe. When the news says that money supply is lower, what they actually mean is that money distribution is lower, because the money supply, as the link shows is rarely diminished. As an economy retracts, funds return to its originator. The wealthiest of our species cannot justify how to spread a trillion dollars around, at the moment, because there fewer and fewer tasks to assign a wage and a human resource. I’ve got a few solutions to recommend in my next book project, Integrationalism: Essays on ownership and distributing value in the 21st century.