Washington D.C.-based newspaper “The Hill” recently ran an opinion piece titled “Bye-bye, bitcoin: It’s time to ban cryptocurrencies.”
The author, Robert A. Manning, proposed a UN Security Council resolution banning cryptocurrencies.
This is not the first time a cryptocurrency ban has been discussed in Washington— in 2019, Mike Crapo, the Senate Banking Committee Chairman, pointed out to the Senate that they can’t ban Bitcoin:
“If the United States were to decide — and I’m not saying that it should — if the United States were to decide we don’t want cryptocurrency to happen in the United States and tried to ban it, I’m pretty confident we couldn’t succeed in doing that because this is a global innovation.”
But the dramatic rise in ransomware attacks over the past few years has brought new life to this old discussion. In addition to these concerns, critics continue to harp on Bitcoin’s energy consumption.
Most of those calling for cryptocurrency bans don’t really understand the technology. If they did, they would understand its benefit, and they would also understand how impossible a ban would be.
However, some interest groups could certainly profit from an attempt at a ban. Central banks, for example, might be able to profit nicely from temporarily forcing cryptocurrencies underground.
So how did ransomware get to be such a big problem? Is a ban actually likely to happen? If it did, what would it look like?
Ransomware Going Pro
The Colonial Pipeline attack brought a huge amount of attention to ransomware, and by extension, cryptocurrency. For the first time, a piece of critical US infrastructure was shut down by ransomware, disrupting fuel supplies across the Eastern seaboard.
The success of ransomware attacks is something of a “snowball effect.” Cryptocurrency made it possible to hold data hostage and collect ransoms from anywhere in the world.
Once hackers started raking in the cash, they were able to reinvest their profits into further improving their operations. Hackers were also able to pay other hackers for services more easily than ever before.
This led to the emergence of a thriving, underground economy. Specialized hackers began concentrating on developing software to bypass the latest antivirus software. Anonymous online payments also allowed them to recruit teams of hackers who specialize in finding vulnerabilities or phishing attacks.
This has led to the formation of a “ransomware cartel” with its own venture capital ecosystem and competition for the best software. This momentum is effectively allowing hackers to stay ahead of the best efforts of the cybersecurity community, especially when it comes to targeting small and medium businesses.
Why a Ban is Unlikely to Happen
With the scope of the problem growing, something has to be done. However, attempting a ban is a horrible idea.
First of all, it’s important to understand that countries can make money by having crypto-friendly legislation. Malta, for example, moved to rebrand itself as the “blockchain island,” and offered tax incentives to crypto companies. More recently, El Salvador made Bitcoin legal tender.
I mean, think about it. Any time a country announces favorable legislation toward cryptocurrency, the price pumps. How many impoverished banana republics are there with corrupt leadership? All a third-world dictator has to do to cash in is buy a ton of some cryptocurrency, and then announce some new pro-crypto law.
If rich countries try to ban cryptocurrencies, the first thing that will happen is a huge dump by panicked investors. No question, some corrupt leaders in poor countries will see this as an opportunity, scoop up the cheap coins, and then announce favorable policies towards cryptocurrency to pump their bags.
In addition to this, legalizing crypto in the face of a global ban would be a great way to attract wealthy investors. It would cause a huge injection of wealth into the economy and a surge of investment.
In short, attempting a cryptocurrency ban would be a great way to shoot yourself in the foot.
Legislation May Still Be Incoming
What is somewhat more likely, however, is selective national bans. China’s policy is a preview of this.
China is cracking down on truly decentralized currencies like Bitcoin and is instead trying to push their central bank digital currencies, as well as other more centralized networks like Vechain. It’s likely that as time goes on, major powers will make laws to support currencies that align with their political interests; while making laws against other currencies.
This means outright cryptocurrency bans will be highly unlikely, but it’s very likely we will see more politically motivated partial bans or “shadow bans” as time goes on.