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  • Tiena Sekharan

Why is it so hard to ban bitcoin?

It is in the interests of central banks, legacy traditional banks, politicians, and weapons manufacturers to ban bitcoin. With bitcoin:

* Central banks will no longer be able to control the money supply which will make their role less consequential.

* Traditional banks will see their role reduced as the peer-to-peer Bitcoin network does away with the need for an intermediary. They’d have less of an opportunity to earn yield on customer deposits as bitcoin makes it possible to self-custody and hold funds in one’s own digital wallet. Banks will no longer enjoy fractional banking and therefore the ability to create money out of thin air (something they often accuse bitcoin of).

* Politicians will no longer be able to give out freebies paid for with cheaply printed money.

* Weapons manufacturers will find that their market has shrunk as wars to defend the petrodollar system no longer need to be waged.

All this means that there are likely several parties in every country that would like nothing more than to see the demise of bitcoin.

Why then are countries finding themselves unable to ban bitcoin?

=> Answer- Game theory

United States

Let’s say someone in the Fed decides to spearhead a campaign to ban bitcoin. Reaching a position of power at the Fed is no easy task and when one does reach such a position, they’ll do all they can to protect the power of that position.

They will however immediately be faced with the following situation. The U.S. Dollar is currently the global reserve currency. They would ideally want that situation to continue. But the Renminbi appears to be making major strides helped by its DC/EP project and Belt and Road Initiative. Would you want to be at the head of the Fed when the U.S. dollar lost its global reserve currency status to the Renminbi? From the US perspective, though not ideal, bitcoin is preferable to Renminbi as a global reserve currency.

If bitcoin does become the global reserve currency backing fiat currencies, then the US cannot let China take the lead in crypto innovation, crypto infrastructure, or crypto investment. China already has a lead in bitcoin mining (both actual mining as well as the manufacture of mining equipment) which gives it a big strategic advantage. The US would therefore want to do everything

possible to secure its position as a leading crypto innovator.


The strategy to make Renminbi the global reserve currency was on track till bitcoin came in to spoil the party. Bureaucrats who had been working decades to raise the status of the Renminbi would not be willing to bow out to bitcoin.

However, in a situation where bitcoin does become the global reserve currency, China would want to be on a level playing field with the US. To that end, they should be worried because the US is unarguably leading in crypto innovation with listed crypto exchanges, crypto funds, crypto custody firms, and the highest retail and institutional holding of crypto assets. The US has now even begun to focus on mining.

The need of the hour is to adapt and develop China’s crypto capabilities- crypto firms, crypto ecosystem, and crypto regulation, and not constrain crypto entrepreneurs through bans.


When politicians and central bankers in India decide that they need to save retail investors from losing their life savings in crypto, they too end up facing the same question. What happens if bitcoin does become the global reserve currency?

Some Indians will lose money in crypto scams just like they’ve lost money in stock market scams. But if you ban crypto, then you exclude your citizens from the crypto ecosystem. You deny them the chance to build crypto companies, get funding in cryptos, take advantage of remote working opportunities that pay in cryptos, and build wealth through this new asset class.

India’s almost 1.4 billion hardworking, educated, entrepreneurial talent is most suited to build the future of money through these new payment rails. Would you want to be the finance minister or Reserve Bank Governor that stopped them?

When can a crypto ban succeed?

If ALL countries impose a strict ban on cryptos, then that is likely to kill cryptos.

=> But most countries will cheat.

What happens if the heads of all countries meet today and sign an agreement committing to banning cryptos in their countries?

Once the representatives are back home, some countries will impose the ban more strictly than others. A ban won’t be palatable in democratic societies where the Constitution guarantees certain freedoms to citizens. Bitcoin is not easy to confiscate because owners of bitcoin can conveniently forget their private keys. Practically, finding and dismantling all mining requires the government to have the ability to spy on every home computer.

The ban will definitely be a hiccup for bitcoin. But given its censorship resistance property, it is likely to survive. And when the anti-fragile bitcoin comes back with all its strength, the countries that don’t strictly impose a ban will find themselves in an advantageous position vs those that do strictly ban. Countries that discreetly allow crypto innovation to continue will be in a position to dominate the global payment rails giving their citizens a huge competitive advantage.

=> Knowing this, any country that cares for its citizens will encourage crypto innovation within its shores.

Final words

Recently, when Archegos Capital Management defaulted on its margin calls, the lenders to Archegos- Goldman Sachs, Nomura, Credit Suisse, and Morgan Stanley held a meeting where they decided that they would not liquidate shares tied to total return swaps held by Archegos. What did Goldman Sachs and Morgan Stanley do when they left the meeting? They sold the shares they had just committed to not selling. Credit Suisse and Nomura as a result took losses of $4.7bn and $2bn respectively.

The countries that impose strict bans will find themselves in the same boat as Credit Suisse, and Nomura and countries that don’t ban bitcoin and look out for the interests of their citizens like Goldman did for its shareholders will benefit.

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