Since shortly after its invention, cryptocurrency has had the attention of central bankers and government regulators all over the world. Without the slightest hint of self-reflection, they have repeatedly warned that Bitcoin, Litecoin, Ethereum, Ripple, and all the rest may be scams or tools to be used by terrorists, drug dealers, money launderers, and other ne’er-do-wells. Several countries have either considered cracking down on crypto exchanges or have already done so. Sometimes satire just writes itself; the fiat currencies that they create and inflate are far more commonly used in the criminal underworld, not to mention the criminal overworld that they run. Speaking of scams, currencies that lose 95 percent of their value over a century have proven quite effective at snatching the wealth out of people’s pockets without them even knowing it.
But perhaps the politicians and legacy financiers are on to something with their desire to ban cryptocurrency. Let us see how government efforts to ban crypto could actually strengthen crypto and do themselves in, and thus why one might agree with statists for the wrong reasons.
If cryptocurrencies are banned, they will not magically disappear, nor will many of the people who use them stop doing so. After all, did bans on drugs or guns ever eliminate those? Of course not; both are more common where they are banned than where they are legal but heavily regulated. Cryptocurrencies perform valuable services for people, and that which has a demand will have a supply. If this cannot happen legally, then it will happen illegally, as with any other commodity. States are good at destroying other centralized entities, but disrupting a decentralized system with no clear point of attack has never been their strong suit. Just look at how much copyrighted material is illegally available online. States cannot stop it because every time they arrest someone, seize a server, or shut down a website, dozens more pop up to replace them. So it would be with cryptocurrencies and sites that accept them. Showing such bans to be ineffective will be an important propaganda victory for crypto users, as will the very fact that it was tried. For why would the state and its central bank have to ban competitors unless their money was too inferior to compete?
To be fair, the blockchains and websites that do come under government attack may have some difficulties. Government hackers may be able to compromise a blockchain with weak cryptography or a website with weak security measures. But adversity breeds innovation, and most people who hack computers for the state have those jobs either because they lack the skill to make more money in the private sector or because the state has some criminal evidence hanging over them. The former are incompetent, while the latter have an incentive to do the minimum to stay out of trouble instead of their best work. Just as website owners appreciate script kiddies who think they can hack for the free security testing they provide, so will cryptocurrency developers come to appreciate attempts by government intelligence agencies to rewrite the blockchain. Customers, meanwhile, can thank the state for providing the electronic equivalent of a eugenics program, killing off the weak currencies and websites to make room for the strong.
On the subject of customer benefits, a ban could make cryptocurrency trading very profitable. Shutdowns and rumors of shutdowns of these venues have already caused exchange rate volatility, presenting excellent buying opportunities. Should a more concerted effort occur, cashouts by people who want to be law-abiding could provide a better opportunity for scofflaws than anything thus far. This process would get the financial establishment out of the crypto world, and much of their financial trickery with them. A more honest marketplace is a better marketplace. Meanwhile, the culture of crypto would return to its anarcho-captialist roots, as those would be the people still using it.
Again, banning something does not get rid of it; it simply goes underground into the black market, which has several important side effects. First, the amount of violence involved in a trade increases, as official means of dispute arbitration are no longer available. But the nature of blockchain technology counters this effect. That is why Silk Road was so popular; it reduced violence in the drug trade by using technology to provide peaceful means of resolving disputes over drug deals while giving users higher quality products. Second, the risk of arrest and the security measures to mitigate that risk drive up prices. This stands to make a tidy profit for those who buy crypto during the cashout before the ban and sell it on the black market afterward. Third, while the state can easily gain information concerning taxable income from legal, regulated exchanges and go after customers who do not give the taxman his cut, they will have a much harder time tracking all of the black market trades that would occur on a peer-to-peer basis in the absence of an exchange. In the words of Napoleon Bonaparte, “Never interrupt your enemy when he is making a mistake.” If Leviathan wants to cut off one of its own food sources, then by all means let it.
Another effect to consider is the migration of legal businesses. If the exchanges and merchants are banned in one country and do not want to keep operating illegally, then they will move to other countries that either want to host or lack the means to ban them. In practice, this means that the cryptocurrency economy will shift toward third-world countries without stable governments. To the extent that this has already happened, it has given people who lacked basic modern economic functionality the financial tools they need to begin improving their lives. Banning crypto in the most developed countries will help the poorest countries by sending jobs there. The resulting localization of usage would lead to cryptocurrencies being used more as money and less as technological curiosities or speculative vehicles, leading to exchange rate stabilization and greater economic security in such places. This would do more than any foreign aid program to lift third-worlders out of poverty, without any of the bribery that enriches despots and provides operational funding to war criminals.
Finally, banning crypto will motivate agorism more generally. With the official link between the fiat economy and the crypto economy severed, some people on the crypto side will end up staying there, especially if they had no success in the legacy system. Necessity is the mother of invention, and these people will have to innovate in order to survive. This has the potential to create the sort of dedicated counter-economics that can support an effective and hostile challenge to the globalist establishment. Friedrich Nietzsche once wrote, “That which is falling should also be pushed.” How much better it is when that which is falling manages to push itself. This, more than anything else, is why one should agree with statists for the wrong reasons when they seek to ban cryptocurrencies.