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Ray Dalio: ‘Good probability’ the U.S. will outlaw Bitcoin

71 points by chaostheory 6y ago

maxclark 6y ago
Or ban the ability to exchange USD for Crypto and vice versa. Part of the argument for crypto is the exact reason why central governments don't want it to exist.
kube-system 6y ago
> ... outlawed the way gold was outlawed. i.e. not outlawed.
- lmkg 6y ago
  Private ownership of (large quantitities of) gold was actually illegal for a few decades in the US. This is separate from transitioning to fiat currency. https://en.wikipedia.org/wiki/Executive_Order_6102 https://en.wikipedia.org/wiki/Executive_Order_6102
  - kube-system 6y ago
    Ah, I knew about that, but it totally slipped my mind. Regardless, there were loopholes, like jewelry. Maybe a bitcoin ban would just mean art like NFTs become suddenly popular.
    - kipchak 6y ago
      The loophole gold did lose quite a bit of it's value as a result though, looking at a CPI adjusted price chart gold went from a high of $692 an ounce in 1934 to a low of $246 in 1970 culminating in the end of the gold standard, and then to $2200 by 1980 following repeals.
  - simonh 6y ago
    Hence the plot of Goldfinger which otherwise, and without an appreciation of the psychological importance of the gold standard, doesn't make a lot of sense to a modern audience. The premise seemed quaint even to me as a teenager in the 80s.
- deleted 6y ago
  [deleted]
wppick 6y ago
Sure... right after they outlaw owning 10 homes Also what does "outlawing" bitcoin even mean. It's not a US based entity.
- actusual 6y ago
  Not allowing exchanges to exist as US companies or interface with US banking institutions would be two very obvious steps towards "outlawing" Bitcoin. I make no value judgements on whether this is a good thing, but want to point out that these steps would likely cripple Bitcoin.
- plank_time 6y ago
  They can seize the assets of all of the Bitcoin trading exchanges overnight. If they coordinate it across the globe so it affects all known exchanges then it will crush the value and lots of people will lose a lot of money. They would effectively shut it down.
  - Havoc 6y ago
    >They can seize the assets of all of the Bitcoin trading exchanges overnight The exchanges don't hold the assets. At least not of the guys that know what they're doing. >If they coordinate it across the globe In all 195 countries? Doubtful. Even if by some miracle this could be pulled off, there are now decentralized exchanges. Pretty much the only thing that would make any dent is getting visa & mastercard to shut down what they can...except they're both making moves in favour of Bitcoin currently
    - plank_time 6y ago
      This is an incredibly naive viewpoint. All legitimate Bitcoin trading exchanges have assets. Some countries have more flexibility to shut down companies than the US. During the golden era, governments weren’t sure what to do with Bitcoin so companies like mtgox were left alone but those days are gone. Especially with the threat of getting arrested for money laundering, it makes the risk much higher and popularity would plummet. They could shut down Bitcoin trading in the Western countries and then put financial sanctions on any countries that allow Bitcoin trading. It would drive Bitcoin trading underground but with no legitimate and easy way of converting your Bitcoin to fiat currency, it would die quickly. Once the price of Bitcoin drops below the price of the cost to mine it in terms of electricity, it would probably stop getting mined by many parts of the world. It also might drive Bitcoin into the hands of China but I think what would happen is that the governments would come up with some other form of cryptocurrency that they could control.
gpapilion 6y ago
There used to be(in the 80s and 90s) these groups that used trade scrip to avoid paying taxes. They were always getting in trouble for making alternative currencies, and trying to avoid direct exchange to keep out of trouble. If I recall someone explaining this to me years ago. I've always wondered why this hasn't happened with bitcoin.
- kube-system 6y ago
  The IRS taxes bitcoin.
  - gpapilion 6y ago
    As an asset, so your gains are taxed. The variability creates a tax nightmare, since the price isn't stable.
    - ca98am79 6y ago
      why would the variability does create a tax nightmare? You are only taxed when you sell at a specific price
      - rashkov 6y ago
        Spending it on a purchase is considered to be the same as selling it at a specific price. If you use bitcoin as a currency, then you have to report every transaction on your tax report, including the price that you acquired the bitcoin at, and its price at the time that you used it to purchase something.
        ryandrake 6y ago
        We have to do that with securities too. You sell, you report. If my Bitcoin wallet was hosted with some financial company like Coinbase, I'd want/expect them to send me a 1099-B reporting those sales to help me with my taxes, just like Schwab sends me a 1099-B for stock transactions. But if not, just keep a record of the transaction in your own documents, showing the price of Bitcoin when the transaction happened, and that should be enough for the IRS.
plank_time 6y ago
Frankly I’m surprised they haven’t done this already. There’s no way to account for money laundering which is an obvious use of Bitcoin. There are services that outright specialize in this. My expectation is that they are coordinating with other countries so that they shut down bitcoin immediately across large swathes of the world. That would be enough to damage it permanently. They did something similar with online poker in the US and I can’t believe they wouldn’t do the exact same thing in this situation.
- scsilver 6y ago
  That's not why Dalio says Bitcoin could be outlawed. His justification is based on gold being outlawed in 1934. It was about monetary policy, not legal matters.
  - plank_time 6y ago
    Yes I know. But the USD was backed by gold then. Today it’s not. Janet Yellen has made several talks about the dangers and risks of Bitcoin in the last several months. I think the US government is definitely setting its sights on Bitcoin.
    - deleted 6y ago
      [deleted]
lazypenguin 6y ago
Was hoping for an insight into the cryptocurrency markets by a financial markets insider but this was a rambling interview of little informational value. I'd be curious to know what the general sentiment is among high-level financiers and politicians towards bitcoin, if there is even a consensus. Right now most of the perspectives I have heard are either from the uninformed individual or from the biased crypto enthusiast.
- PEJOE 6y ago
  Having spent some time around a subset of what I think you would call high level financiers, for the most part they don’t really know what it is or understand it, and it isn’t relevant to their day to day job of doing transactions.
- scsilver 6y ago
  Here is a class at MIT taught by Gary Gensler, the pick for SEC head, focused on blockchain. Its a nice starting point for a detailed view from the perspective of a top regulator with deep industry experience. https://ocw.mit.edu/courses/sloan-school-of-management/15-s12-blockchain-and-money-fall-2018/ https://ocw.mit.edu/courses/sloan-school-of-management/15-s1... https://en.m.wikipedia.org/wiki/Gary_Gensler https://en.m.wikipedia.org/wiki/Gary_Gensler
rfd4sgmk8u 6y ago
Highly doubtful. Code is free speech, and the ability to run whatever software one wishes is the expression of that free speech. Where they do have the power is regulations regarding (legacy) financial industry. Given the interest in magic internet money from institutional investors and wall street, I think the moment where it would be acceptable to block fiat->cryptocurrency transactions has passed, and would now offer a systemic problem for big finance today.
- jcranmer 6y ago
  > Highly doubtful. Code is free speech, and the ability to run whatever software one wishes is the expression of that free speech. Yeah, that's not how the law works. There are regulations about what software you can run with software-defined radios, since the FCC regulates radio emissions and SDR allows you to potentially violate those regulations. Free speech is not going to be a defense here that will win you victory in the courts.
- naravara 6y ago
  I don't think this interpretation is supported by any caselaw or jurisprudence but I'm open to reading it if you have it.
jasode 6y ago
When some people think that governments can't really ban bitcoin because the bitcoin nodes can always exist "underground" and keep mining over VPNs, and the government has no mindreading technology to know which citizens have memorized a 12-word passkey to their wallet, and so on... that's a naive view of the coercion tools the government has at its disposal. To lower bitcoin's advantages as an inflation hedge, governments can: - tax heavily the conversions of bitcoin into fiat cash and vice-versa back into bitcoin. E.g. an "oppressive 90% tax" at the exchanges like Coinbase - declare exchange businesses as illegal. This is analogous outlawing nationwide gambling websites. Yes, the bitcoin network by design still operates without exchanges but the barriers to quick liquidity and fears of cashing out affects its value as inflation protection - declare property transactions enabled by bitcoin to be null & void. E.g. If you convert 4 bitcoins @ $50k to buy a $200k house, that real estate transaction is illegal and the government uses its power to confiscate the property. Analogous to property seizures because of drug money. The government still wants to trace the origins of money and if it's an illegal activity, the property is forfeited. - require citizens to declare the bitcoins they own. This is based on the honor system and citizens can try to hide it of course -- but the FBI and IRS can monitor large amounts of fiat cash deposits into bank accounts and if the citizen can't explain where $200k legitimately came from, ("Uh, I sold a car wash business!"), they get fined or go to jail. Of course, the black market will come up with solutions to "legitimize bitcoin cashouts" but again, the barrier to lawful liquidity decreases its inflation hedging value. - require a government license to use bitcoin. E.g. After your license is approved, you must run extra software to notify to the government the bitcoin addresses and amounts you intend to transact. Yes, the bitcoin network is independent from the government but that doesn't matter because if your self-reported declarations don't match the bitcoin activity, your property can be seized. Analogous to informing the SEC ahead of time of a new issuance of corporate stock. - ... any creative other ways? The common theme is that citizens still have to interact with the real world and the government has a monopoly on enforcing property rights and putting people in jail in that real world. There doesn't have to be a law that literally has the word "ban" in it. Instead, governments can changes bitcoin's utility and thus its market value. So to balance all the negativity above, the way bitcoin can avoid government interference is to virally embed itself so thoroughly in society that it makes it politically impossible for the government to pass anti-bitcoin laws. Examples: + many influential members congress have significant net worth tied up in bitcoin so they are unwilling to pass laws that hurt themselves. Self-interest and self-preservation can be used against the government. + several large institutions (e.g. California Federal pensions, cancer charity endowments, etc) that millions depend on have significant bitcoin holdings. + the more influential billionaires that hold bitcoin, the more they pressure congressmembers into leaving bitcoin alone It's hard to predict how game theory between government and citizens will play out. It seems like it's easier for China & Russia to control its citizens bitcoin rather than the USA.
habitue 6y ago
South Korea backed off from just such a ban in 2018[1], the details of which might be informative if anyone is trying to determine how likely a similar ban here might be [1] https://www.pymnts.com/news/bitcoin-tracker/2018/south-korea-backs-off-bitcoin-ban/ https://www.pymnts.com/news/bitcoin-tracker/2018/south-korea...
- syrrim 6y ago
  >The South Korean government has no other choice but to follow the regulatory frameworks and trends established by other leading governments I.e. the US.
- nuisance-bear 6y ago
  Greece implemented capital controls in June 2015. The United Kingdom struggled to keep them implemented in October 1979. I'd look at these episodes and the Asian Financial Crisis from 1997 as examples of the kind of thing Dalio is probably thinking about. https://en.wikipedia.org/wiki/Capital_controls_in_Greece https://en.wikipedia.org/wiki/Capital_controls_in_Greece https://en.wikipedia.org/wiki/Exchange_Controls_in_the_United_Kingdom https://en.wikipedia.org/wiki/Exchange_Controls_in_the_Unite...
undefined1 6y ago
there is over $1 trillion held in Bitcoin, which represents a lot of people and companies. how exactly do you unwind that without generating a massive backlash and other secondary effects? would the government buy out everyone's position or what?
- innagadadavida 6y ago
  How about capping the maximum amount you can withdraw to something like 100k and taxing the rest at 99%?
- TuringNYC 6y ago
  They can do it indirectly by changing the tax treatment.
  - gruez 6y ago
    In what way? You already have to pay capital gains on it.
    - ben_w 6y ago
      Governments have as much control over tax codes as developers have over source code (literally — a tax code is just some written instructions, so it can be any computable function if you really want to do that). Governments can break entire sectors accidentally, doing so deliberately is trivial. For example, they could make a special cryptocurrency tax which is 100%. And/or a heavy tax on all currency exchanges “expect for the national currencies of the nations in Annex D”, and Annex D turns out to be a list of countries that they have a specific trade agreement with.
    - TuringNYC 6y ago
      They can have things like Transfer Taxes (https://en.wikipedia.org/wiki/Transfer_tax https://en.wikipedia.org/wiki/Transfer_tax) to reduce liquidity and hence desirability They can remove long-term capital gains on it and make it all short term treatment or partly short term treatment (I think that is how it works for futures IIRC.) They could create different categories of taxes (e.g., what we have for dividends), except with higher categories.
daenz 6y ago
Imo Bitcoin will eventually be outlawed because it will be competition to the banks' coins. When banks make a crypto coin that is ready for public consumption then they will come down hard on Bitcoin.
- simonh 6y ago
  Except bitcoin isn't actually used as a currency, it's only really used as an asset. As such it's not in competition with anything functionally, because it has no significant functional utility outside it's asset value.
- dkjaudyeqooe 6y ago
  You're confusing econdings with what they represent. For instance, the EBC doesn't care about BTC because they're not euros and never will be.
y-c-o-m-b 6y ago
Slightly off-topic: with currency being mostly digital and now crypto-currency being more common, it'll be interesting to see what happens in the event of a massive power failure (e.g. coronal mass ejections, mega-earthquakes, super-hurricanes, etc.). I imagine if you had a bank statement as support, you could at least withdraw money from the bank in the form of cash. Where with crypto you don't have that potential safety-net and any mining operations will take a huge hit, possibly causing catastrophic volatility in its worth.
- liuliu 6y ago
  Isn't that the entire plot of Mr. Robot (S1)? :)
- arthurcolle 6y ago
  Not really - you can have a cold wallet that contains your private keys. Unless every single computer lost a copy of the blockchain blocks dir simultaneously, this seems pretty much of a non-issue
- RamshackleJ 6y ago
  so you're saying a black swan event might affect the price? gee well Im glad that doesn't currently happen with USD, CNY, JPY.... you can also use bitcoin like a physical bearer asset (gold bullion) by using things like https://opendime.com/ https://opendime.com/ so even if the network was 100% down transactions could still happen IRL. You'd just be exchanging a hidden private key that can move UTXO's on the blockchain. considering that I'd say bitcoin is much more anti-fragile than a bank statement, in most of the natural disasters you're talking about im not so sure banks will be letting you withdraw any significant amount of $
- whytaka 6y ago
  It's irresponsible to hold your assets in any one vehicle. Your 6 month buffer savings should be in cash or something equally liquid. If I had all my safety net in real estate or paper gold, it'd be the same problem.
- majewsky 6y ago
  If your threat scenario is a long-lasting large-scale power outage, the correct answer is a stash of canned food and clean water. Cash money is going to be less useful than you think when the grocery store supply chains collapse.
aphextron 6y ago
Thank god. This will make sure no one has access to Bitcoin, just like when we outlawed heroin and cocaine.
- enoughalready 6y ago
  The same can be said of rape and murder.
- rspeele 6y ago
  For the record, I doubt the US will ban bitcoin. But let's imagine what would happen if it did. It wouldn't eliminate access to bitcoin but it would hurt its value quite badly. The demand for heroin and cocaine is driven by intrinsic value: it gets you high. You can restrict supply but you can't stop people from wanting to get high. The demand will be there no matter what. The utility of the product is unchanged by laws or public perception. Bitcoin doesn't have intrinsic value. It has value because people will buy it from you. I think BTC is a crappy technology, but I'm not ashamed to admit I'd buy one at $50,000/ea this instant, only because I know I can turn around and resell it for $57,000/ea. The only reason I want 1 BTC is that I know enough other people want 1 BTC badly enough, that I can sell it to them at a good price. If exchanging my Bitcoin back into fiat or directly for goods becomes illegal, now I've got difficulty and risk involved in using it. I won't want Bitcoins as much. Its utility -- being useful for exchange -- can be directly impacted by the law. A lot of the people who want to buy bitcoin today would not buy it if it were illegal to do so. I'm talking about casual retail speculators, Tesla, Microstrategy... all of your basic white collar investors who are looking to make a buck but don't want to get in trouble for it. If you delete all those people from the buying side of the order books, and put those who have already bought and want to get out on the selling side, what happens to the price?
  - jsutton 6y ago
    I'm tired of this flippant statement that many crypto-detractors take as fact, that there's no intrinsic value in Bitcoin. When you create a product or service that other people want to use and pay you for, is there no intrinsic value there?
DennisP 6y ago
He uses the gold ban as precedent. The US didn't outlaw private gold ownership because gold was competing with the dollar. It outlawed gold ownership because the dollar was backed by gold, the Fed wanted to print more dollars to stimulate the economy, and at the time it could only do that if it had enough gold to back those dollars. They were running out of gold so they confiscated it from regular people. https://en.wikipedia.org/wiki/Executive_Order_6102#Rationale https://en.wikipedia.org/wiki/Executive_Order_6102#Rationale
- bendbro 6y ago
  I'm amazed I've never heard about this. If I lived then and was going to have my gold confiscated, I don't think I'd be able to avoid going full killdozer.
  - taylodl 6y ago
    The 1% are still pretty pissed about it - nearly 100 years later. If you're an American then I am surprised/concerned you never heard about this in history class.
    - bendbro 6y ago
      Yeah, I am concerned on that same point as well. I had spent a lot of time reading about various historical events both in school and outside of it, so it's surprising that I never encountered this.
  - DennisP 6y ago
    They did at least pay people, if they surrendered it in time. (Then they raised the price of gold afterwards.) Come to think of it, that's another difference from "outlawing Bitcoin."
    - tablespoon 6y ago
      > They did at least pay people, if they surrendered it in time. (Then they raised the price of gold afterwards.) Wouldn't it be unconstitutional for them to seize and not pay for it? Though they probably just paid face value in paper money.
ardit33 6y ago
Good... bitcon is just a massive ponzi/M&L scheme, being held by few whales with the rest holding crumbs and just hoping for the moon... My biggest issue with it is that is extremely inefficient and just pollutes needlessly. Has anyone tried to buy something with it lately? I tried in 2016, and it was almost impossible unless you go through 3rd party exchange, and the rates were insane.
- blhack 6y ago
  So let me get this straight: You haven't used bitcoin in half of a decade, but you assume you have some knowledge about its uselessness that everybody else doesn't?
  - ardit33 6y ago
    If you read it, mine was a question. If you have any special knowledge, Enlighten us please.... If you have to use centralized third parties to use it efficiently, then it defeats its purpose. my single bitcoin remained there, because I couldn't use it in an easy manner. I am kind of glad about it, as it has risen in value, but really, apart 'it rises in value', what practical use does it have? Feels like modern day tulip mania.
Animats 6y ago
The real question is which cryptocurrencies can survive a net outflow. That's how bubbles suddenly collapse. Someone sold US$2.1 billion in Bitcoin on March 15th, and the price of Bitcoin dropped 10%.[1] Which is not too bad. The SEC made most of the Initial Coin Offering industry go away by prosecuting some of the blatant frauds. The ICO backed by nonexistent diamonds and real estate was the first to go down. After a few of those, the SEC sent out letters asking ICO issuers why they thought they weren't issuing an unregulated security. A few registered. Most gave up. The SEC has essentially grandfathered Bitcoin as pre-dating any SEC guidance on the subject, and as lacking an "issuer". Newer make-money-fast schemes get full scrutiny. [1] https://www.forbes.com/sites/ninabambysheva/2021/03/15/22-billion-bitcoin-liquidation-may-have-caused-10-correction/ https://www.forbes.com/sites/ninabambysheva/2021/03/15/22-bi...
- bb88 6y ago
  So quick math. Bitcoin is a $1.6TB market valuation. $2.1B represents around .1% of that value. So the total capitalization dropped $160B when someone removed $2.1B in value? That is a multiplier of 80 times. And you're saying that's pretty good?
  - phroobster 6y ago
    A huge number of assets would drop similarly if you unloaded .1% of their entire market cap in one day. I’d say BTC recovered fairly well from that sale.
- habitue 6y ago
  By "effectively grandfathered", are you referring to their justification of bitcoin and ethereum as not securities under the Howey rule, or are you referring to some other comments? (Genuinely curious)
  - Animats 6y ago
    Yes.
techwizrd 6y ago
Is this really likely? We're seeing Bitcoin embraced by financial institutions, payment processors like Visa, pension funds, etc. It seems to me that the wind is not blowing in the direction of a Bitcoin ban (or "ban").
- gremlinsinc 6y ago
  Kinda wish it would a little... I love the concept of crypto, esp. possible uses for fighting income inequality and creating UBI.... but Bitcoin is a power hog, I'd love to see it die--but still keep Ethereum, Cardano and newer tech, unless BTC can figure out a switch to proof of stake or something a bit less energy required, or move miners to the moon.
motohagiography 6y ago
Seems more plausible that mixers and other techniques for evading surveillance would be outlawed, as I can't imagine a government giving up the blockchain data on peer-to-peer transactions. Imposing a KYC regs and social credit scores on wallets would be another likely measure. The U.S. will probably lead with a ban threat, and then walk it back to these measures as "reasonable," negotiated solutions. I'm not advocating these, but if I had to bet where the puck was going, this seems more likely.
jimbob45 6y ago
Can we ban proof-of-work cryptos at least? I know you can't exactly ban BTC itself but you can ban the new PoW ones for environmental reasons and mining BTC isn't profitable for...anyone but the NASA supercomputer, right?
marsrover 6y ago
While I'm sure everyone here on Hacker News is hoping this happens, it won't. Large companies are adopting cryptocurrency. Telsa accepts it as payment. Visa is starting to settle transactions on Ethereum. Coinbase is about to IPO. And if it does, it won't matter. How do you even ban Bitcoin? Are they going to set up a great firewall? Cryptocurrency isn't the type of thing you can just ban.
- djohnston 6y ago
  They would ban exchanges from operating within the US, which would render Bitcoin useless for 99.99% of US users. I don't think they'll do this either, but they don't have to do anything fancy to make Bitcoin worthless for the average citizen.
  - marsrover 6y ago
    While being able to use exchanges in the US is helpful, it isn't necessary. It might curb short term adoption, but it doesn't stop the inevitable, which is crypto completely taking over the world. It's in the US's best interest to embrace it. Edit: the best downvotes are from people that missed out on the technological innovation of a lifetime.
    - djohnston 6y ago
      I understand it isn't technically necessary but it really is if you're trying to include non-technical retail investors in the market.
  - ajkdhcb2 6y ago
    Peer-to-peer exchange works perfectly fine. It is funny how it used to be the most common way to exchange crypto, but now people think you need these dangerous and inefficient centralised exchanges just because they became popular.
    - randomopining 6y ago
      Do you have a logical use case scenario for p2p/otc if the gov bans exchanges? If there truly can be decentralized liquidity in one of these decentralized exchanges... then it’s def gonna stay alive
taylodl 6y ago
Another chicken little claiming the Big Bad Fed is going to pressure Congress into outlawing bitcoin. The most open economy in the world is going to outlaw bitcoin? To what end? What are they going to outlaw next? Outlaw gold? Silver? Platinum? Everyone calls bitcoin a currency. I don't think of it that way. I think of it as digital gold and should be treated the same way as you'd treat gold from an investment standpoint. The fact that Tesla takes bitcoin as payment is simply a novelty of our time. Either way the US isn't going to outlaw bitcoin.
merricksb 6y ago
Two earlier discussions in recent days: https://news.ycombinator.com/item?id=26625859 https://news.ycombinator.com/item?id=26625859 (68 points/119 comments) https://news.ycombinator.com/item?id=26618206 https://news.ycombinator.com/item?id=26618206 (34 points/79 comments)

71 points by chaostheory 6y ago

Or ban the ability to exchange USD for Crypto and vice versa. Part of the argument for crypto is the exact reason why central governments don't want it to exist.

kube-system 6y ago

> ... outlawed the way gold was outlawed. i.e. not outlawed.

lmkg 6y ago
Private ownership of (large quantitities of) gold was actually illegal for a few decades in the US. This is separate from transitioning to fiat currency. https://en.wikipedia.org/wiki/Executive_Order_6102 https://en.wikipedia.org/wiki/Executive_Order_6102
- kube-system 6y ago
  Ah, I knew about that, but it totally slipped my mind. Regardless, there were loopholes, like jewelry. Maybe a bitcoin ban would just mean art like NFTs become suddenly popular.
  - kipchak 6y ago
    The loophole gold did lose quite a bit of it's value as a result though, looking at a CPI adjusted price chart gold went from a high of $692 an ounce in 1934 to a low of $246 in 1970 culminating in the end of the gold standard, and then to $2200 by 1980 following repeals.
- simonh 6y ago
  Hence the plot of Goldfinger which otherwise, and without an appreciation of the psychological importance of the gold standard, doesn't make a lot of sense to a modern audience. The premise seemed quaint even to me as a teenager in the 80s.
deleted 6y ago
[deleted]

wppick 6y ago

Sure... right after they outlaw owning 10 homes Also what does "outlawing" bitcoin even mean. It's not a US based entity.

actusual 6y ago
Not allowing exchanges to exist as US companies or interface with US banking institutions would be two very obvious steps towards "outlawing" Bitcoin. I make no value judgements on whether this is a good thing, but want to point out that these steps would likely cripple Bitcoin.
plank_time 6y ago
They can seize the assets of all of the Bitcoin trading exchanges overnight. If they coordinate it across the globe so it affects all known exchanges then it will crush the value and lots of people will lose a lot of money. They would effectively shut it down.
- Havoc 6y ago
  >They can seize the assets of all of the Bitcoin trading exchanges overnight The exchanges don't hold the assets. At least not of the guys that know what they're doing. >If they coordinate it across the globe In all 195 countries? Doubtful. Even if by some miracle this could be pulled off, there are now decentralized exchanges. Pretty much the only thing that would make any dent is getting visa & mastercard to shut down what they can...except they're both making moves in favour of Bitcoin currently
  - plank_time 6y ago
    This is an incredibly naive viewpoint. All legitimate Bitcoin trading exchanges have assets. Some countries have more flexibility to shut down companies than the US. During the golden era, governments weren’t sure what to do with Bitcoin so companies like mtgox were left alone but those days are gone. Especially with the threat of getting arrested for money laundering, it makes the risk much higher and popularity would plummet. They could shut down Bitcoin trading in the Western countries and then put financial sanctions on any countries that allow Bitcoin trading. It would drive Bitcoin trading underground but with no legitimate and easy way of converting your Bitcoin to fiat currency, it would die quickly. Once the price of Bitcoin drops below the price of the cost to mine it in terms of electricity, it would probably stop getting mined by many parts of the world. It also might drive Bitcoin into the hands of China but I think what would happen is that the governments would come up with some other form of cryptocurrency that they could control.

gpapilion 6y ago

There used to be(in the 80s and 90s) these groups that used trade scrip to avoid paying taxes. They were always getting in trouble for making alternative currencies, and trying to avoid direct exchange to keep out of trouble. If I recall someone explaining this to me years ago. I've always wondered why this hasn't happened with bitcoin.

kube-system 6y ago
The IRS taxes bitcoin.
- gpapilion 6y ago
  As an asset, so your gains are taxed. The variability creates a tax nightmare, since the price isn't stable.
  - ca98am79 6y ago
    why would the variability does create a tax nightmare? You are only taxed when you sell at a specific price
    - rashkov 6y ago
      Spending it on a purchase is considered to be the same as selling it at a specific price. If you use bitcoin as a currency, then you have to report every transaction on your tax report, including the price that you acquired the bitcoin at, and its price at the time that you used it to purchase something.
      - ryandrake 6y ago
        We have to do that with securities too. You sell, you report. If my Bitcoin wallet was hosted with some financial company like Coinbase, I'd want/expect them to send me a 1099-B reporting those sales to help me with my taxes, just like Schwab sends me a 1099-B for stock transactions. But if not, just keep a record of the transaction in your own documents, showing the price of Bitcoin when the transaction happened, and that should be enough for the IRS.

plank_time 6y ago

Frankly I’m surprised they haven’t done this already. There’s no way to account for money laundering which is an obvious use of Bitcoin. There are services that outright specialize in this. My expectation is that they are coordinating with other countries so that they shut down bitcoin immediately across large swathes of the world. That would be enough to damage it permanently. They did something similar with online poker in the US and I can’t believe they wouldn’t do the exact same thing in this situation.

scsilver 6y ago
That's not why Dalio says Bitcoin could be outlawed. His justification is based on gold being outlawed in 1934. It was about monetary policy, not legal matters.
- plank_time 6y ago
  Yes I know. But the USD was backed by gold then. Today it’s not. Janet Yellen has made several talks about the dangers and risks of Bitcoin in the last several months. I think the US government is definitely setting its sights on Bitcoin.
  - deleted 6y ago
    [deleted]

lazypenguin 6y ago

Was hoping for an insight into the cryptocurrency markets by a financial markets insider but this was a rambling interview of little informational value. I'd be curious to know what the general sentiment is among high-level financiers and politicians towards bitcoin, if there is even a consensus. Right now most of the perspectives I have heard are either from the uninformed individual or from the biased crypto enthusiast.

PEJOE 6y ago
Having spent some time around a subset of what I think you would call high level financiers, for the most part they don’t really know what it is or understand it, and it isn’t relevant to their day to day job of doing transactions.
scsilver 6y ago
Here is a class at MIT taught by Gary Gensler, the pick for SEC head, focused on blockchain. Its a nice starting point for a detailed view from the perspective of a top regulator with deep industry experience. https://ocw.mit.edu/courses/sloan-school-of-management/15-s12-blockchain-and-money-fall-2018/ https://ocw.mit.edu/courses/sloan-school-of-management/15-s1... https://en.m.wikipedia.org/wiki/Gary_Gensler https://en.m.wikipedia.org/wiki/Gary_Gensler

rfd4sgmk8u 6y ago

Highly doubtful. Code is free speech, and the ability to run whatever software one wishes is the expression of that free speech. Where they do have the power is regulations regarding (legacy) financial industry. Given the interest in magic internet money from institutional investors and wall street, I think the moment where it would be acceptable to block fiat->cryptocurrency transactions has passed, and would now offer a systemic problem for big finance today.

jcranmer 6y ago
> Highly doubtful. Code is free speech, and the ability to run whatever software one wishes is the expression of that free speech. Yeah, that's not how the law works. There are regulations about what software you can run with software-defined radios, since the FCC regulates radio emissions and SDR allows you to potentially violate those regulations. Free speech is not going to be a defense here that will win you victory in the courts.
naravara 6y ago
I don't think this interpretation is supported by any caselaw or jurisprudence but I'm open to reading it if you have it.

jasode 6y ago

When some people think that governments can't really ban bitcoin because the bitcoin nodes can always exist "underground" and keep mining over VPNs, and the government has no mindreading technology to know which citizens have memorized a 12-word passkey to their wallet, and so on... that's a naive view of the coercion tools the government has at its disposal. To lower bitcoin's advantages as an inflation hedge, governments can: - tax heavily the conversions of bitcoin into fiat cash and vice-versa back into bitcoin. E.g. an "oppressive 90% tax" at the exchanges like Coinbase - declare exchange businesses as illegal. This is analogous outlawing nationwide gambling websites. Yes, the bitcoin network by design still operates without exchanges but the barriers to quick liquidity and fears of cashing out affects its value as inflation protection - declare property transactions enabled by bitcoin to be null & void. E.g. If you convert 4 bitcoins @ $50k to buy a $200k house, that real estate transaction is illegal and the government uses its power to confiscate the property. Analogous to property seizures because of drug money. The government still wants to trace the origins of money and if it's an illegal activity, the property is forfeited. - require citizens to declare the bitcoins they own. This is based on the honor system and citizens can try to hide it of course -- but the FBI and IRS can monitor large amounts of fiat cash deposits into bank accounts and if the citizen can't explain where $200k legitimately came from, ("Uh, I sold a car wash business!"), they get fined or go to jail. Of course, the black market will come up with solutions to "legitimize bitcoin cashouts" but again, the barrier to lawful liquidity decreases its inflation hedging value. - require a government license to use bitcoin. E.g. After your license is approved, you must run extra software to notify to the government the bitcoin addresses and amounts you intend to transact. Yes, the bitcoin network is independent from the government but that doesn't matter because if your self-reported declarations don't match the bitcoin activity, your property can be seized. Analogous to informing the SEC ahead of time of a new issuance of corporate stock. - ... any creative other ways? The common theme is that citizens still have to interact with the real world and the government has a monopoly on enforcing property rights and putting people in jail in that real world. There doesn't have to be a law that literally has the word "ban" in it. Instead, governments can changes bitcoin's utility and thus its market value. So to balance all the negativity above, the way bitcoin can avoid government interference is to virally embed itself so thoroughly in society that it makes it politically impossible for the government to pass anti-bitcoin laws. Examples: + many influential members congress have significant net worth tied up in bitcoin so they are unwilling to pass laws that hurt themselves. Self-interest and self-preservation can be used against the government. + several large institutions (e.g. California Federal pensions, cancer charity endowments, etc) that millions depend on have significant bitcoin holdings. + the more influential billionaires that hold bitcoin, the more they pressure congressmembers into leaving bitcoin alone It's hard to predict how game theory between government and citizens will play out. It seems like it's easier for China & Russia to control its citizens bitcoin rather than the USA.

habitue 6y ago

South Korea backed off from just such a ban in 2018[1], the details of which might be informative if anyone is trying to determine how likely a similar ban here might be [1] https://www.pymnts.com/news/bitcoin-tracker/2018/south-korea-backs-off-bitcoin-ban/ https://www.pymnts.com/news/bitcoin-tracker/2018/south-korea...

syrrim 6y ago
>The South Korean government has no other choice but to follow the regulatory frameworks and trends established by other leading governments I.e. the US.
nuisance-bear 6y ago
Greece implemented capital controls in June 2015. The United Kingdom struggled to keep them implemented in October 1979. I'd look at these episodes and the Asian Financial Crisis from 1997 as examples of the kind of thing Dalio is probably thinking about. https://en.wikipedia.org/wiki/Capital_controls_in_Greece https://en.wikipedia.org/wiki/Capital_controls_in_Greece https://en.wikipedia.org/wiki/Exchange_Controls_in_the_United_Kingdom https://en.wikipedia.org/wiki/Exchange_Controls_in_the_Unite...

undefined1 6y ago

there is over $1 trillion held in Bitcoin, which represents a lot of people and companies. how exactly do you unwind that without generating a massive backlash and other secondary effects? would the government buy out everyone's position or what?

innagadadavida 6y ago
How about capping the maximum amount you can withdraw to something like 100k and taxing the rest at 99%?
TuringNYC 6y ago
They can do it indirectly by changing the tax treatment.
- gruez 6y ago
  In what way? You already have to pay capital gains on it.
  - ben_w 6y ago
    Governments have as much control over tax codes as developers have over source code (literally — a tax code is just some written instructions, so it can be any computable function if you really want to do that). Governments can break entire sectors accidentally, doing so deliberately is trivial. For example, they could make a special cryptocurrency tax which is 100%. And/or a heavy tax on all currency exchanges “expect for the national currencies of the nations in Annex D”, and Annex D turns out to be a list of countries that they have a specific trade agreement with.
  - TuringNYC 6y ago
    They can have things like Transfer Taxes (https://en.wikipedia.org/wiki/Transfer_tax https://en.wikipedia.org/wiki/Transfer_tax) to reduce liquidity and hence desirability They can remove long-term capital gains on it and make it all short term treatment or partly short term treatment (I think that is how it works for futures IIRC.) They could create different categories of taxes (e.g., what we have for dividends), except with higher categories.

daenz 6y ago

Imo Bitcoin will eventually be outlawed because it will be competition to the banks' coins. When banks make a crypto coin that is ready for public consumption then they will come down hard on Bitcoin.

simonh 6y ago
Except bitcoin isn't actually used as a currency, it's only really used as an asset. As such it's not in competition with anything functionally, because it has no significant functional utility outside it's asset value.
dkjaudyeqooe 6y ago
You're confusing econdings with what they represent. For instance, the EBC doesn't care about BTC because they're not euros and never will be.

y-c-o-m-b 6y ago

Slightly off-topic: with currency being mostly digital and now crypto-currency being more common, it'll be interesting to see what happens in the event of a massive power failure (e.g. coronal mass ejections, mega-earthquakes, super-hurricanes, etc.). I imagine if you had a bank statement as support, you could at least withdraw money from the bank in the form of cash. Where with crypto you don't have that potential safety-net and any mining operations will take a huge hit, possibly causing catastrophic volatility in its worth.

liuliu 6y ago
Isn't that the entire plot of Mr. Robot (S1)? :)
arthurcolle 6y ago
Not really - you can have a cold wallet that contains your private keys. Unless every single computer lost a copy of the blockchain blocks dir simultaneously, this seems pretty much of a non-issue
RamshackleJ 6y ago
so you're saying a black swan event might affect the price? gee well Im glad that doesn't currently happen with USD, CNY, JPY.... you can also use bitcoin like a physical bearer asset (gold bullion) by using things like https://opendime.com/ https://opendime.com/ so even if the network was 100% down transactions could still happen IRL. You'd just be exchanging a hidden private key that can move UTXO's on the blockchain. considering that I'd say bitcoin is much more anti-fragile than a bank statement, in most of the natural disasters you're talking about im not so sure banks will be letting you withdraw any significant amount of $
whytaka 6y ago
It's irresponsible to hold your assets in any one vehicle. Your 6 month buffer savings should be in cash or something equally liquid. If I had all my safety net in real estate or paper gold, it'd be the same problem.
majewsky 6y ago
If your threat scenario is a long-lasting large-scale power outage, the correct answer is a stash of canned food and clean water. Cash money is going to be less useful than you think when the grocery store supply chains collapse.

aphextron 6y ago

Thank god. This will make sure no one has access to Bitcoin, just like when we outlawed heroin and cocaine.

enoughalready 6y ago
The same can be said of rape and murder.
rspeele 6y ago
For the record, I doubt the US will ban bitcoin. But let's imagine what would happen if it did. It wouldn't eliminate access to bitcoin but it would hurt its value quite badly. The demand for heroin and cocaine is driven by intrinsic value: it gets you high. You can restrict supply but you can't stop people from wanting to get high. The demand will be there no matter what. The utility of the product is unchanged by laws or public perception. Bitcoin doesn't have intrinsic value. It has value because people will buy it from you. I think BTC is a crappy technology, but I'm not ashamed to admit I'd buy one at $50,000/ea this instant, only because I know I can turn around and resell it for $57,000/ea. The only reason I want 1 BTC is that I know enough other people want 1 BTC badly enough, that I can sell it to them at a good price. If exchanging my Bitcoin back into fiat or directly for goods becomes illegal, now I've got difficulty and risk involved in using it. I won't want Bitcoins as much. Its utility -- being useful for exchange -- can be directly impacted by the law. A lot of the people who want to buy bitcoin today would not buy it if it were illegal to do so. I'm talking about casual retail speculators, Tesla, Microstrategy... all of your basic white collar investors who are looking to make a buck but don't want to get in trouble for it. If you delete all those people from the buying side of the order books, and put those who have already bought and want to get out on the selling side, what happens to the price?
- jsutton 6y ago
  I'm tired of this flippant statement that many crypto-detractors take as fact, that there's no intrinsic value in Bitcoin. When you create a product or service that other people want to use and pay you for, is there no intrinsic value there?

DennisP 6y ago

He uses the gold ban as precedent. The US didn't outlaw private gold ownership because gold was competing with the dollar. It outlawed gold ownership because the dollar was backed by gold, the Fed wanted to print more dollars to stimulate the economy, and at the time it could only do that if it had enough gold to back those dollars. They were running out of gold so they confiscated it from regular people. https://en.wikipedia.org/wiki/Executive_Order_6102#Rationale https://en.wikipedia.org/wiki/Executive_Order_6102#Rationale

bendbro 6y ago
I'm amazed I've never heard about this. If I lived then and was going to have my gold confiscated, I don't think I'd be able to avoid going full killdozer.
- taylodl 6y ago
  The 1% are still pretty pissed about it - nearly 100 years later. If you're an American then I am surprised/concerned you never heard about this in history class.
  - bendbro 6y ago
    Yeah, I am concerned on that same point as well. I had spent a lot of time reading about various historical events both in school and outside of it, so it's surprising that I never encountered this.
- DennisP 6y ago
  They did at least pay people, if they surrendered it in time. (Then they raised the price of gold afterwards.) Come to think of it, that's another difference from "outlawing Bitcoin."
  - tablespoon 6y ago
    > They did at least pay people, if they surrendered it in time. (Then they raised the price of gold afterwards.) Wouldn't it be unconstitutional for them to seize and not pay for it? Though they probably just paid face value in paper money.

ardit33 6y ago

Good... bitcon is just a massive ponzi/M&L scheme, being held by few whales with the rest holding crumbs and just hoping for the moon... My biggest issue with it is that is extremely inefficient and just pollutes needlessly. Has anyone tried to buy something with it lately? I tried in 2016, and it was almost impossible unless you go through 3rd party exchange, and the rates were insane.

blhack 6y ago
So let me get this straight: You haven't used bitcoin in half of a decade, but you assume you have some knowledge about its uselessness that everybody else doesn't?
- ardit33 6y ago
  If you read it, mine was a question. If you have any special knowledge, Enlighten us please.... If you have to use centralized third parties to use it efficiently, then it defeats its purpose. my single bitcoin remained there, because I couldn't use it in an easy manner. I am kind of glad about it, as it has risen in value, but really, apart 'it rises in value', what practical use does it have? Feels like modern day tulip mania.

Animats 6y ago

The real question is which cryptocurrencies can survive a net outflow. That's how bubbles suddenly collapse. Someone sold US$2.1 billion in Bitcoin on March 15th, and the price of Bitcoin dropped 10%.[1] Which is not too bad. The SEC made most of the Initial Coin Offering industry go away by prosecuting some of the blatant frauds. The ICO backed by nonexistent diamonds and real estate was the first to go down. After a few of those, the SEC sent out letters asking ICO issuers why they thought they weren't issuing an unregulated security. A few registered. Most gave up. The SEC has essentially grandfathered Bitcoin as pre-dating any SEC guidance on the subject, and as lacking an "issuer". Newer make-money-fast schemes get full scrutiny. [1] https://www.forbes.com/sites/ninabambysheva/2021/03/15/22-billion-bitcoin-liquidation-may-have-caused-10-correction/ https://www.forbes.com/sites/ninabambysheva/2021/03/15/22-bi...

bb88 6y ago
So quick math. Bitcoin is a $1.6TB market valuation. $2.1B represents around .1% of that value. So the total capitalization dropped $160B when someone removed $2.1B in value? That is a multiplier of 80 times. And you're saying that's pretty good?
- phroobster 6y ago
  A huge number of assets would drop similarly if you unloaded .1% of their entire market cap in one day. I’d say BTC recovered fairly well from that sale.
habitue 6y ago
By "effectively grandfathered", are you referring to their justification of bitcoin and ethereum as not securities under the Howey rule, or are you referring to some other comments? (Genuinely curious)
- Animats 6y ago
  Yes.

techwizrd 6y ago

Is this really likely? We're seeing Bitcoin embraced by financial institutions, payment processors like Visa, pension funds, etc. It seems to me that the wind is not blowing in the direction of a Bitcoin ban (or "ban").

gremlinsinc 6y ago
Kinda wish it would a little... I love the concept of crypto, esp. possible uses for fighting income inequality and creating UBI.... but Bitcoin is a power hog, I'd love to see it die--but still keep Ethereum, Cardano and newer tech, unless BTC can figure out a switch to proof of stake or something a bit less energy required, or move miners to the moon.

motohagiography 6y ago

Seems more plausible that mixers and other techniques for evading surveillance would be outlawed, as I can't imagine a government giving up the blockchain data on peer-to-peer transactions. Imposing a KYC regs and social credit scores on wallets would be another likely measure. The U.S. will probably lead with a ban threat, and then walk it back to these measures as "reasonable," negotiated solutions. I'm not advocating these, but if I had to bet where the puck was going, this seems more likely.

jimbob45 6y ago

Can we ban proof-of-work cryptos at least? I know you can't exactly ban BTC itself but you can ban the new PoW ones for environmental reasons and mining BTC isn't profitable for...anyone but the NASA supercomputer, right?

marsrover 6y ago

While I'm sure everyone here on Hacker News is hoping this happens, it won't. Large companies are adopting cryptocurrency. Telsa accepts it as payment. Visa is starting to settle transactions on Ethereum. Coinbase is about to IPO. And if it does, it won't matter. How do you even ban Bitcoin? Are they going to set up a great firewall? Cryptocurrency isn't the type of thing you can just ban.

djohnston 6y ago
They would ban exchanges from operating within the US, which would render Bitcoin useless for 99.99% of US users. I don't think they'll do this either, but they don't have to do anything fancy to make Bitcoin worthless for the average citizen.
- marsrover 6y ago
  While being able to use exchanges in the US is helpful, it isn't necessary. It might curb short term adoption, but it doesn't stop the inevitable, which is crypto completely taking over the world. It's in the US's best interest to embrace it. Edit: the best downvotes are from people that missed out on the technological innovation of a lifetime.
  - djohnston 6y ago
    I understand it isn't technically necessary but it really is if you're trying to include non-technical retail investors in the market.
- ajkdhcb2 6y ago
  Peer-to-peer exchange works perfectly fine. It is funny how it used to be the most common way to exchange crypto, but now people think you need these dangerous and inefficient centralised exchanges just because they became popular.
  - randomopining 6y ago
    Do you have a logical use case scenario for p2p/otc if the gov bans exchanges? If there truly can be decentralized liquidity in one of these decentralized exchanges... then it’s def gonna stay alive

taylodl 6y ago

Another chicken little claiming the Big Bad Fed is going to pressure Congress into outlawing bitcoin. The most open economy in the world is going to outlaw bitcoin? To what end? What are they going to outlaw next? Outlaw gold? Silver? Platinum? Everyone calls bitcoin a currency. I don't think of it that way. I think of it as digital gold and should be treated the same way as you'd treat gold from an investment standpoint. The fact that Tesla takes bitcoin as payment is simply a novelty of our time. Either way the US isn't going to outlaw bitcoin.

merricksb 6y ago

Two earlier discussions in recent days: https://news.ycombinator.com/item?id=26625859 https://news.ycombinator.com/item?id=26625859 (68 points/119 comments) https://news.ycombinator.com/item?id=26618206 https://news.ycombinator.com/item?id=26618206 (34 points/79 comments)