Rather than hijack this current thread on Bitcoins (and also, hopefully, to get a bigger audience to see my question by putting into the thread title), I will start this new thread about a specific Bitcoin question I have.
Specifically:
Can a federal government make Bitcoin use by its citizens, illegal? And/or: Can a federal government make it illegal to use of Bitcoins for any financial transaction in that country?
In the US, for example, would there be any Constitutional or other prohibition preventing the government from enacting such legislation?
I am interested in the answers to these questions since it seems to me that the outlook for the continued viability of Bitcoin (or its descendants) would be rather poor if people knew they would never be allowed to use them at their neighbourhood Starbucks or for online payments, and indeed that any attempt to use them for illegal activities would make the crime even more likely to be sniffed out (i.e. you’d then be committing two different sets of crimes and thus presumably involving more people in more transactions, creating more electronic trails and handoffs, and getting additional government agencies on your tail, e.g. FBI and Treasury Department/Secret Service/Homeland Security, thus causing there to be an even greater chance of being caught).
In another relatively recent thread on Bitcoins, the possibility of making their use illegal was raised but no one confirmed or refuted it. So, I ask here, again: Can a federal government make Bitcoin use by its citizens, illegal? And/or: Can a federal government make it illegal to use Bitcoins for any financial transaction in that country?
In a nutshell no. It would be like making barter illegal. If I want to trade you 5 bitcoins for a car and you accept them, we have a sale. If I trade you 5 pounds of marijuana for a car we have a sale. As long as the needed paperwork is filled out for the transfer of the car, it has been sold.
Uh, wut? Are you saying it’s legal for me to accept a sack full of weed in exchange for a car? Because I’m fairly certain the government would not see that much differently than exchanging said sack for some money.
Well, to be fair, it’s not illegal because it’s illegal to use weed as a tool in barter, but it’s illegal because general possession of weed is illegal* and possession of weed for sale is illegal*.
That said, I don’t think there’s any reason the US government couldn’t ban the use of bitcoin. It would almost certainly fall within the purview of the Commerce Clause, and I can’t offhand think of any explicit Constitutional right protecting it against such a ban. I suppose the Supreme Court could decide it’s a fundamental right and protected by the 14th Amendment, in which case then it’d be open to the strict scrutiny analysis. I think the right to barter would qualify (since it’s rooted in centuries of tradition and all that) but I’m not sure about a non-governmental currency. Would be interesting. (How would that apply to video games which use in-game currencies which can be purchased with, and sometimes even exchanged for, real money?)
Haven’t there been some local communities here and there with a high representation of far-right-wing anti-Federal types, that they’ve tried to create their own local coinage or currency for local use – only to have the Secret Service, Lord Protectors of the Coinage of the Realm, swoop down from on high and snuff them out like jackboots on the necks of cute little kittens? I’m sure I’ve read of some such cases.
Okay, here’s some Wikipedia cites: Private Currency lists several attempts in the United States and elsewhere, some of them ruled legal, but others ruled illegal and squelched with such ruthless efficiency as only the Secret Service can do – apparently because they were fraudulent in ways that one might expect of “Sovereign Citizens” even if they weren’t really, but something along those lines.
Liberty Dollar – One of those private currencies that went down in flames of fire after The Fed smashed their operation like stepping on a garden snail, due to all the irregularities and fraud that was going on. Or maybe they were just competing with U. S. Dollars, and The Fed isn’t going to allow that to happen. Read the Wiki and see what you can make of it.
They weren’t really competing with US dollars. The problem was the manufacturers were (apparently intentionally) implying Liberty Dollars were official issue. Advertisements for Liberty Dollars referred to them as “currency” and “real money”. And the coins themselves had “USA” and “dollars” inscribed on them.
Here’s what a Liberty coin looked like: front and back
Norfed would make coins with a half an ounce of silver and inscribe on them a value of ten dollars. But the market price of silver was well below that - in the period when Norfed was in business, silver never rose above six dollars an ounce.
So Norfed was making silver coins that contained less than three dollars of silver and stamping “ten dollars” on them as a face value and making them look like official currency. Norfed then sold the coins to “dealers” at a discount - they only paid five dollars for these “ten dollar” coins. And Norfed encouraged people to put these coins “into circulation”. Which basically means fooling somebody into thinking these fake coins were genuine ten dollar coins.
One of the Liberty Dollar’s several problems was that it was private coinage. You can make a private currency but it can’t be made of metal. (Ithaca hours are all-paper.)
I suspect that if bitcoin ever became a serious rival to local currency, we would see a propaganda campaign to discredit it. All it would take would be a couple of scandals and no one would trust them. The whole point of national currencies is trust, and that is the only thing that gives them value.
Nonsense. Of course a law could be passed making the use of bitcoins illegal. They could also make laws prohibiting the use of any other particular type of thing - say, bananas - in barter. It is not the same thing as making barter in general illegal at all, but, then, I do not really see why they couldn’t do that, too. Whether such laws could be generally and successfully enforced may be another matter, but they could be passed and on the statute books.
I concur. In upholding the constitutionality of Executive Order 6102 and the Gold Reserve Act of 1933, SCOTUS said that Congress had the right to regulate commodities (in this case gold) used in place of currency. Look up the Gold Clause Cases.
Here’s a not very good map from Wikipedia showing Bitcoin’s status around the world.
Note that it’s missing Bolivia which has ruled against its use. Plus the status in PRC is virtually banned: It can’t be converted to Yuan, used to purchase physical goods or processed by banks (which drove their exchanges out of business).
Financial transactions, including bartering, are so heavily controlled in North Korea I can’t imagine anyone legally using it there.
I would say probably not. There was a movement recently to try to ban a pizza shop in San Ysidro from accepting Mexican pesos in payment for a pizza. But no objection was raised to WalMart in Bellingham Washington accepting Canadian dollars.
Any person, including a business entity, can accept anything it wants, in payment of a debt. The only thing the government can stipulate is that they MUST accept US Dollars if US dollars are tendered and if the value of the transaction is expressed in US dollars.
But that answers the question of whether the government can ban bitcoin use, not whether the government can ban bitcoins, a non-trivial difference.
I think the question of whether bitcoin gets regulated (or banned) will largely depend on how it’s used in the future. Like the Liberty Dollar example cited by Little Nemo, the feds may start looking at bitcoin differently if they see significant examples of questionable use.
There’s no logical reasoning here. Of course the government can make any specific type of currency illegal. If you think otherwise, please offer a cite or at least an argument.
Sure. The US, any country, or any state could pass a
law that said, “the use, possession or acceptance of bit coins is illegal. If convicted, the penalty is xyz.”
Exactly … and trust (in the US dollar) is the one thing which is being slowly but surely eroded due to the Fed’s manic money-printing policies.
IMO by the time that bitcoins become a serious issue, the dollar will have gone the way of the Weimar Republic mark , and there will be much more pressing issues to legislate about .
