BTC cannot be banned? In fact, the United States does not want to ban BTC

On Tuesday, Senate Banking Committee Chairman Mike Crapo said at a hearing on the regulatory framework for digital currencies and blockchain that given that Bitcoin is a global innovation, the United States cannot technically ban Bitcoin. However, in theory, there are indeed some ways to kill Bitcoin. However, perhaps the United States has never thought about killing Bitcoin.

Consensus among American politicians: Bitcoin cannot be killed

On Tuesday, the U.S. Senate Banking, Housing, and Urban Affairs Committee discussed blockchain and cryptocurrency regulation. Chairman Mike Crapo said that it would be almost impossible for the United States to ban Bitcoin. He said:

“If the United States decided — I’m not saying it should — if the United States decided it didn’t want to see cryptocurrency in the United States and tried to ban it, I’m fairly confident that we would not be successful in doing so because this is a global innovation.”

Earlier this month, Congressman Patrick McHenry told CNBC that (the government) has no power to kill Bitcoin.

In fact, Bitcoin's creator, Satoshi Nakamoto, had anticipated potential government interference. The blockchain technology that underpins Bitcoin consists of a global network of millions of nodes, making it virtually indestructible as long as the Internet is not compromised.

With Facebook’s Libra, the U.S. government has more control and can block its launch. But even if it goes live, Libra’s blockchain will be a permissioned chain containing only 100 nodes representing large companies.

In reality, it seems that the United States can destroy Bitcoin

However, in theory, Bitcoin is not unbreakable, and some governments could ban citizens from using it. Countries with less developed internet infrastructure can simply shut down the network. Last month, an internet blackout lasted for weeks in Sudan. The government deliberately cut off the internet to prevent local protests, but it could use the same strategy to ban the use of cryptocurrencies.

Still, only some governments would take such drastic steps. Not the United States.

If the US government really thinks Bitcoin is a threat, they will choose to throw money at it and buy it out. American economists and cryptography experts always simulate various emerging phenomena to predict their potential direction and impact. James Rickards explained in his book "Currency Wars: The Making of the Next Global Crisis" how he participated in the US government's currency war simulation program to understand the potential impact of various monetary strategies.

The US Government Might Buy All Available BTC

It’s hard to believe that the US government and intelligence agencies don’t understand the potential of Bitcoin. The FBI shut down Silk Road (a black market shopping network that used Bitcoin transactions) back in 2013, so the US government knows the threat of decentralized currencies. If it really wanted to kill Bitcoin, the government could buy all available Bitcoins through its agencies, which at the time had a market value of only $1 billion.

Even with a market cap of over $175 billion, the US can still buy more. Excluding what has been lost and what the hodlers are holding on to, the government needs about $100 billion to stop this "threat" called Bitcoin. The $100 billion figure is so huge that it sounds simply fantastic. However, in 2008, the US spent more than $700 billion on bank bailouts, and the Fed has invested trillions of dollars in its quantitative easing programs (Q1, Q2, Q3).

If you can't beat them, join them

So why is Bitcoin still around? Well, because the US government doesn’t actually mind. Maybe Bitcoin was born out of a sincere intention to disrupt traditional finance, but in reality, it helps the dollar deal with its inflation and move to a new financial system centered around central bank-issued digital currencies.

The US dollar holds the status of the world's reserve currency. Under the Bretton Woods Agreement, the dollar was backed by gold at $35 per troy ounce as of 1971. But it did not stop the Federal Reserve from printing money out of thin air, and the United States always knew how to pass on inflation (mostly through generous grants such as the Marshall Plan initiative).

After the Nixon Shock in 1971, the dollar became a free-floating currency as the gold standard was removed. However, the US made an agreement with Saudi Arabia (and other OPEC countries) to sell its oil only in dollars. This helped the dollar ensure global demand, allowing the US government to continue printing money out of thin air.

Countries that openly dare to sell their oil in other currencies than dollars seem to have had a bad ending. The point 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 demand for dollars in order to continue printing money 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 demand for dollars

Bitcoin is another market that attracts a lot of dollars. Therefore, it can help the United States reduce some of its inflation and allow the Federal Reserve to continue to print money. At the same time, as crypto analyst Willy Woo pointed out, institutional investment has a negative impact on Bitcoin price behavior. In fact, if only a few people control the supply of BTC, it cannot make Bitcoin a good medium of exchange.

However, this may be the final stage of this approach by the United States, as the world is turning to digital currencies. On Sunday, Agustin Carstens, head of the Bank for International Settlements (BIS), told the Financial Times that central banks will issue digital currencies sooner than we think.

Central banks have long anticipated this shift. Bitcoin is helping to make the transition to the dollar smoother.