As China’s central bank hauls in several bitcoin exchanges, could governments crush the cryptocurrency?
Harriet Green, deputy business features editor at City PM, says Yes:
If governments like China’s perceive bitcoin to be a threat, they will seek to undermine it. While they couldn’t destroy existing bitcoins, they could destroy demand. Any cryptocurrency is at risk of being made illegal by any government. Granted, users can move underground, but that merely adds to de-legitimisation. Regulation to date has been minimal, but history tells us that governments rarely preference light regulation – it just takes them a while to catch up with technology. And this is intensified when states collaborate. It’s not difficult to imagine, for instance, the European Union coming up with a new definition for bitcoin as, say, an investment, with all net gains taxed at 30 per cent. Or, government could manipulate the exchange rate of bitcoin – not unfamiliar territory for most. Buy a load and drive up the price, then sell off and collapse it. And, if it wanted to, government could even exploit the transparency of the blockchain and punish people for holding bitcoin at all.
Charles Hayter, chief executive and co-founder at CryptoCompare.com, says No:
Governments cannot stop bitcoin. But they can make it difficult to use or punish people for using it. Making it difficult to use, however, would involve diktats on internet service providers that are easily worked around with VPNs or via other means. Punishing people would only move the industry underground and reduce its size. China’s recent moves are not a specific anti-bitcoin move but more of an attempt to temper the leveraged speculative nature of the Chinese bitcoin ecosystem. It remains to be seen if they are going to make an example. Governments are and should compete for this nascent industry developing in the crypto-economy – any country that balkanises itself or regulates too stringently will lose out on the so-called internet of quantised value – and the potential that it enables in the internet of things. There is a clear balance to be preserved though between consumer protection and stifling innovation. Stopping it in its entirety is a folly and a mission impossible.