Why a ban on crypto may not be possible? Cryptocurrencies have evolved dramatically over the years, so much that it has raised a few legitimate concerns among several governments over its potential to disrupt the current financial systems and economic conditions.
Rightly so, different governments of different countries are contemplating on either imposing a complete ban on cryptocurrencies or put some regulations on it so that the apparent ‘dangers’ can be minimized, if not eliminated.
It is quite natural that in such a situation several questions may come across your mind such as:
- Will crypto be really banned?
- What kind of a ban will it be?
- Even if it is banned, will trading crypto be possible?
Crypto investors and all who are interested in and involved with the industry are also asking these same questions for over a past couple of months now.
The experts, however, think otherwise. They believe that the governments will not ban crypto completely.
Instead, they may set up dedicated regulatory bodies that may come up with stringent regulatory measures.
This will enable the countries to harness the immense potential of crypto and blockchain technology.
Therefore, imposing some regulations by governments all over the world is highly likely, but a complete ban on cryptocurrencies is not.
There are several good reasons for it. If you want to know the reasons, you will find them all in this article.
Why a Ban on Crypto May Not be Possible?
Instead of looking for the answers to the questions mentioned above, you should ponder on a more relevant question considering the current condition in the crypto scene.
It is whether or not the government may ban crypto completely in the first place.
And, if such a ban is enforced how it would affect the ability of the crypto industry to continue doing what it is now.
The answer to both these questions may really surprise you.
It may not be soon that crypto will be banned completely and the experts point out why.
Therefore, if you are wondering whether or not you should invest in crypto fearing a sudden ban on it and losing all that you have, this is the right place to be to know that you should not panic. Here are the reasons.
Lack of Solid Reasons
The first and most important reason to say that a complete ban on crypto is highly unlikely is the lack of solid reasons for it.
Proper reasoning is required by the government for a complete ban on crypto.
Governments should inquire as to why people value crypto so highly and what are the benefits that it provides to them.
If a country bans crypto without considering these reasons, a couple of years down the road it may repent of losing the opportunity to make it big out of a major financial revolution.
Therefore, any decision of the government should be properly and adequately supported by strong evidence.
The legislators of one country should consider the approaches taken by other countries and the effects it has had on the economy of that country before enforcing the same in theirs.
Stating that crypto can be used for criminal activities or illegal purposes is not a strong enough reason because the same possibility is with fiat money, and that is not banned but regulated.
Therefore, passing the buck on terror funding and other criminal activities on crypto is anything but fair.
If the banking system is not banned based on this reason, then why should crypto get such a discriminated treatment?
Now, if disruption is the reason then the government should ask whether email has disrupted post and telegraph systems and put this service to an end. If not then crypto will not as well.
Therefore, experts say, instead of trying to stop the transformation unreasonably, the governments should be reasonable enough to adapt to it, nurture this technology and allow it to evolve and then capitalize on it.
If the government cannot justify a ban, they should not go for it. Period.
Blockchain Functions on Crypto
Without crypto blockchain cannot function. Whether it is in the field of education or healthcare, blockchain allows paperless sharing of information which is immutable.
In the case of education, the results of examinations will be tamper-proof, and in the healthcare industry the services will be much more effective and faster.
Apart from these, there are one too many use cases of the blockchain technology and it needs Ether to function.
This is the crypto coin that is needed to pay the fees to the network for validation which powers the Ethereum platform.
This is true for all blockchain networks that need different types of crypto coins to function.
Structure and Design
Cryptocurrencies are not physical money but are just pieces of a long and complex computer code, technically speaking.
Transferring crypto coins from one wallet to another is just like transferring a piece of music from one pen drive to another.
Therefore, it cannot be banned because it will take away the ability of the users to send crypto coins to each other.
Therefore, only barriers to entry can be created from outside by the governments.
Most of the crypto users trade their crypto through exchanges and banning them by the government will make things pretty difficult for the mainstream users.
The blockchain technology underlying crypto will also become illegal once a complete ban is enforced.
This will result in collateral damage not only because a lot of products based on blockchain will not be created anymore but will also involve a lot of money to develop a separate blockchain right from scratch.
This will be more like reinventing the wheel with no assurance that the new solution will be better.
There may be different countries that have banned crypto but the objective behind such a ban may not have been accomplished.
Therefore, any government, before imposing a ban on crypto, should look at the success stories, or lack thereof, of the other countries who have taken this route before.
For example, Turkey had little or no success with such a ban because trading in crypto coins continues even today, of course in a ‘legal’ grey area.
Also, in Nigeria, even after the government prohibited the banks from supporting any sort of crypto transactions and asked them to close all accounts related to crypto transactions, crypto transactions have boomed.
This is because people bypassed the centralized exchanges and resorted to the P2P trading platforms.
In South Korea, the Financial Services Commission required linking the bank accounts with crypto trading accounts. It also banned Initial Coin Offerings or ICOS in 2021.
All these new legislations were very difficult for the banks and crypto exchanges to comply with and as a result several exchanges had to close down. They are contemplating suing the government for their premature demise.
Also, crypto transactions were put under capital control and foreign currency purchases were at 50,000 annually in South Korea.
But this law was very difficult to put into force due the lack of compliant exchanges, a situation which was made even worse by the numerous DeFi channels that are easily accessible.
Finally, China was against crypto since 2013 and has been trying to ban it since then. Recently, they sent strict messages to the banks and all allied service providers related to cryptocurrencies, including the crypto miners.
Even then crypto activities have grown in the country, and of course illegally. After crypto trading was banned in China in 2020, there has not only been a steep rise in the number of illicit crypto addresses but China also had the highest number of users of the DeFi channels.
There were more than 33000 blockchain registrations on the DeFi channels in 2020 itself, according to a report. Therefore, in China crypto transactions and mining still continues, though in stealth mode.
Some Other Reasons
Experts suggest that a complete ban on crypto would do more harm than good to the economy of a country. Here are a few more reasons to say so:
According to many experts, a complete ban on crypto may simply augment the black market trade causing more problems for the country.
Also, it may become nearly impossible to create any product based on public blockchain if a complete ban on crypto is enforced.
If crypto is banned completely it will result in an unwanted mass exodus of extremely talented programmers, innovators, and computer scientists.
Also, the public blockchain needs an incentive mechanism to survive and this is provided by cryptocurrencies.
A ban will also cause a loss to a country being unable to raise capital on a global scale through legal token issuance.
A major part of the income of the country is in the form of the money saved from transaction cost while making foreign remittances, thanks to cryptocurrencies transactions. Even 7 to 10% lower transaction fees can save billions of dollars!
Cryptocurrency is no physical money as you may know. Instead, it is simply a technology, and, technology, as they say, cannot be banned but the behaviors of the actors can only be regulated just like in any other technology.
When this technology is regulated and improved, it will transform the entire technology ecosystem of the country, which, in turn, will create more jobs. Banning crypto will therefore result in a huge loss in employment.
The possibilities of creating economic value addition will not be possible if crypto is banned which can be a significant loss for the country.
Billions of dollars come through crypto investments and cost savings which also creates subsequent tax revenue for the government.
Without crypto there will be no NFTs or Non-Fungible Tokens because network fees are paid in crypto by the participants.
This means that the small and medium artists and creators will not be able to access the global market with their creations.
Crypto can be socially beneficial as well. It can raise funds for specific causes by collecting crypto assets from all over the world.
A crypto network can also spread awareness among the refugees in particular about accessing and spending their cash assistance even in remote areas with no proper financial system to disburse these funds.
All these mean banning crypto completely will be very inappropriate. Instead, it should be regulated so that there can be fair competition.
It can be concluded that a complete ban on the use and trade of crypto is unlikely. It would create bigger issues for the economy, functionality of the financial system, and for the entire country. All the reasons are discussed in this article.