> Governments can make it a felony (jail time, fines) to interact with your wallet, effectively freezing it. Governments already make it a felony to possess va

> Governments can make it a felony (jail time, fines) to interact with your wallet, effectively freezing it. Governments already make it a felony to possess various illicit substances above a certain quantity. That hasn't done much to curtail the drug trade. More to the point: if a government attempted this, it would open up every other Bitcoin user to a DoS attack; I would just need to send some money around to well-known addresses to "freeze" those wallets, too. > And because bitcoins are infinitely traceable, governments can make any bitcoins that at any time originated from your wallet property of the state (i.e. any wallet held in an exchange that comes in possession of one of your coins can have those coins confiscated). They would need to control the private keys in order to actually perform that confiscation. Tokens are the property of whomever actually controls the wallet; the feds can "freeze" however much they like, but there ain't really much they can do outside of a very targeted attack (i.e. one such that the costs of performing that attack vastly outweigh the benefit unless I'm some Bitcoin millionaire and I'm careless enough to keep everything in a single wallet). > (The simplest approach for regulators implementing this system is to declare ALL wallets frozen, and to require public registration of wallets to unfreeze them, e.g. by being on an exchange with existing KYC laws. This makes all new private wallets useless prior to registration, and makes it a felony to transact with unregistered wallets. Exchanges would then literally prevent people from transacting with unregistered bitcoin wallets. Existing KYC laws are sufficient for governments to regulate bitcoins in this way.) All that would accomplish would be to shift traffic to exchanges that operate outside KYC (which was always possible, given that there's nothing stopping two people from exchanging cryptocurrency for other things in meatspace, including fiat currency or actual goods/services). It would also, again, open up the KYC wallets to a DoS; if even so much as a single transaction from an unregistered wallet is enough to feloniously taint a registered wallet, then a malicious actor with even a tiny amount of money to burn could do so pretty easily and turn all sorts of innocent people into felons overnight - rendering such a regulation useless.