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Date: 2024-02-29

Can Cryptocurrency Be Banned?

Crypto systems have received a huge amount of press around the world for the way in which they've often been used for illicit purposes, from money laundering to funding the purchase of illegal items.

The problem with "crypto" lies in the way in which it has been created to provide anonymous transactions to users around the world; meaning that whether you are located in the US or China, the underlying technology gives you the ability to send/receive money as required.

Thus, when you're looking at whether the "crypto" systems should be banned - the underlying reality is that whilst they cannot be "banned" outright (and likely won't be anyway), they will certainly be regulated by governments. who either don't want their populace indulging in the illicit ways they can be used - or fear the economic ramifications of the technology.

This tutorial will examine how the "crypto" world works, and ultimately what it means for the various systems, which could be regulated by governments...

Crypto = Decentralized

The "crypto" world is basically a "decentralized" world.

It's predominantly built on "blockchain" technology, which allows users to utilize a global dataset whilst using peer-to-peer (client) applications. In other words, rather than requiring a central data processing solution, the new "crypto" services basically give users the opportunity to build & manage their data completely independently.

The way that it works is to create a "decentralized database" which resides on 100's or even 1000's of computer systems around the world (known as "nodes"). These computer systems are often referred to as "miners" in the "crypto" ecosystem, as they are meant to provide the data processing & updating requirements for the system.

Thus, if you're talking about "crypto", you're basically looking at the way in which people are able to utilize hands-off services which allow users to utilize a huge number of services without having to rely on large companies to provide the functionality.

To this end, one of the main points of contention for the majority of users (of "crypto") is that you will typically end up being unable to determine exactly what you're doing in terms of how you're able to find the various ideas of the system.

The governments cannot "regulate" a system which is spread around (at least part of it will be out of their jurisdiction), and thus you need to be extremely clear on what might happen if governments do decide to cause a problem...

What May Happen To The Crypto Tokens...

Rather than being banned outright (which is not possible), a number of governments (namely China, India and South Korea) have implemented punitive measures on the exchanges which handle the service.

Essentially, whenever you use the various "crypto" services, you need to use an "exchange" to either buy or sell them. An exchange is basically like Amazon - a retailer for "Bitcoin" and other "crypto" tokens. These exchanges either allow other users to list their tokens for sale, or buy them from a large mining pool (typically through BitStamp).

The point is that a number of governments have placed restrictions on the various exchanges - limiting the use of "Bitcoin" in their respective jurisdiction. This means that whilst users are still able to utilize the various "crypto" systems for wider appeal, they will generally end up highly restricted, due to the way in which the various exchanges have prevented them from being able to interact with the underlying fiat-currency base.

On top of this, "Bitcoin" (which is the most prolific coin) also has a large number of potential issues in terms of competitive advantage. The coin is entirely "open source", meaning that it can be downloaded, edited and changed by anyone. This has lead to a large number of clones.

However, and most importantly, it means that a government or large financial institution is at liberty to essentially create their own "Bitcoin" - allowing users to use a regulated "crypto" token without the need to rely on an obscure system to do it.