As soon as bitcoin becomes a threat to currencies like the euro or the US dollar, governments will ban bitcoin. This or something similar is the argument of many who are critical of the sustained success of the fastest growing asset in history.
However, why is this assumption unlikely and why is the risk of a Bitcoin ban possibly lower than widely perceived?
Here is the problem: Bitcoin has a market volume of nearly 1 trillion euros (as of early 2024). Recently, some public companies, including MicroStrategy and Tesla, have converted a significant part of their cash reserves into Bitcoin and parked them as a reserve asset on their balance sheets. In October 2021, El Salvador became the first country to introduce bitcoin as legal tender and shortly thereafter issued bitcoin-backed bonds. Likewise, it is already owned by a number of private companies as well as various investment funds. It is furthermore owned by respected investors in the financial world à la Paul Tudor Jones, Bill Miller, Raoul Pal, Cathie Woods and Stanley Druckenmiller, as well as more and more politicians around the world.
At the beginning of 2024, the US Securities and Exchange Commission approved eleven Bitcoin ETFs simultaneously. These include ETFs from BlackRock and Fidelity. More than 40 German banks have applied for a license for crypto assets from the banking and financial supervisory authority in Germany. US banks can also officially hold crypto assets in custody. The development of the market for Bitcoin in the western world is moving in the exact opposite direction of a ban.
For large capital markets such as Europe, the USA, or Japan, it would already be extremely difficult to ban Bitcoin. If the market capitalization of Bitcoin and thus the value held in Bitcoin increases to a few trillion US dollars in the coming years (approx. a doubling of the current price), it will become almost impossible politically and economically to ban Bitcoin. An attempt would increasingly mean an attack on the balance sheets of companies, banks, funds, and investors.
Finally, in practice, all the incentives speak against a Bitcoin ban, especially by a democratic government. An attempt to ban Bitcoin or heavily regulate its use directly benefits a rival government. Since there are numerous competing governments and confederations of states around the world, all pursuing competing interests, a coordinated effort to ban Bitcoin is rather unrealistic. Bitcoin is the most mobile and censorship-resistant form of money in human history. These properties and the digital nature of bitcoin make it easy to transfer it from hostile jurisdictions to countries with the least restrictive regulations.
However, this does not mean that after India, Nigeria and China, other states will not try to ban Bitcoin. However, every time a government tries to restrict the use of Bitcoin, it is an extremely effective marketing tool that once again demonstrates Bitcoin's livelihood and value, thereby encouraging its spread.
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