Could Donald Trump ban Bitcoin?

Noelle Acheson is a veteran of Business Analysis and a member of CoinDesk's product team. The opinions expressed in this article are those of the author.

The following article was originally published in Institutional Crypto CoinDesk, a free newsletter for institutional investors interested in cryptographic badets. Register here.

---

Bitcoin once again made headlines last week after US President Donald Trump told Twitter "not to be a fan" of crypto-currencies, "whose value is extremely volatile and based on an erased air ".

The discussion that followed largely celebrated global attention and the fact that bitcoin is now important enough that one of the most powerful men in the world can make a public statement about it. And the crypto markets seemed to ignore it, signaling with relative indifference that they had greater concerns.

A potential conversation that has been largely ignored is how bitcoin is vulnerable to US-sized governments. Now that Bitcoin is catching Trump's attention, will there be more inflammatory statements? Will it state that it is a "bad idea" that we must "deal with"? That would not be devoid of character.

The instinctive reaction to the possibility of a bitcoin ban is "Yeah, try it." Many believe that a ban would be unconstitutional. Most insist that even adopted, it would have no impact.

These badumptions are bold, largely unchallenged and merit closer examination because they hide all confusion about the nature of bitcoin and the extent of influence of the world's largest economy.

In essence, Trump can try to prohibit bitcoin. If successful, the ban could have a significant impact on the value of the technology. But he will not do it.

(Please note that I am not a lawyer and each interpretation has nuances, and I have a modest amount of bitcoins with no short positions, so I am not interested in the spread of FUD, but investors of all types to be aware of the risks, and the real danger lies in those we do not even think about.)

The code is not a speech

Let's first see how he could do it. Many claim that the ban on using the bitcoin code is a ban on civil liberties. The code is speech, the argument goes, and as such is protected by the first amendment.

It's not as clear as it looks. Contrary to popular belief, there was no official statement in support of the badertion – the Bernstein case, so often cited, in which a judge upheld the badertion that the government could not prevent the publication of the code, was replaced by a call and finally returned without an official. decision.

Although the code may include some language elements, in that it can be used to express and communicate, the code is also very different. Unlike the word, he performs actions, which can be (and often are) regulated by law, with official application.

Also, l & # 39; writing The code as a form of expression is in itself as harmless as saying what we think. But bitcoin users do not write code, they execute it. They take measures that could theoretically be declared illegal. And given the transparency of the public blockchain, it would not be impossible to apply.

Given the size and scope of the US market, its lack of the bitcoin ecosystem would be felt, not just in price. Fungibility would be questioned – the risk of accepting a bitcoin that was a few leaps into an American portfolio could lead to the emergence of parallel markets for "perfectly clean" parts. And the risk of inadvertently sending a payment to a US-based person or entity could push transactions to more expensive and more traceable vehicles.

Size and power

If Trump is convinced that it would be pointless to stick to the Bitcoin protocol, he could still decide to put a stop to cryptocurrency activities. If it is difficult to prevent independent companies from managing badets that are not illegal, the imposition of a series of compliance and tax requirements could render these projects unusable. .

And as we have seen with the US approach to Iran's sanctions – the threat of retaliation against any company, regardless of its jurisdiction, which has violated the ban on trade – it is possible that the attitude of the issuer of the world reserve currency is aggressive could force other sovereign nations to capitulate.

In other words, in the face of American repression, bitcoin would not disappear – its code and operation are decentralized, and the benefits of technology will always give it some demand – but its potential could be reduced.

However, this bleak scenario overlooks one important detail: banning Bitcoin is not in Trump's interest.

Play at the base

It's not so much the huge fight that a bitcoin ban would bring before the courts at all levels, which would dissuade him – he did not fear that before. More likely to worry him is the alienation of a significant portion of his riding.

In addition to the dissonances of the most anti-all-time president who tried to neutralize one of the most conflicting technologies of the century, one of his electoral covenants aimed at lowering financial regulation and encouraging innovation. . Weakening one's image as a disruptive and free-market evangelist could undermine the confidence of his constituents and hurt him in the polls.

In addition, some of the leading states supporting Trump have pbaded considerable time and effort by positioning itself as jurisdictions that respect cryptography. Even the main Trump team has its converts: his acting chief of staff, Mick Mulvaney, was one of the first crypto-currency supporters.

One could argue that blocking bitcoin would be more of a step forward to protect the dollar than an encroachment on federal power (although the administration seems to view Facebook's Scale as a greater threat), the precedent of trying to stop a particular The violent use of the code will make uncomfortable many companies, whether funded or not.

And most of Wall Street, the traditional financial institutions that Trump seems to want to cultivate through its tax and economic policies, is interested in bitcoin, either through the development of cryptographic operations, or by the preferences investment from institutional clients.

It is also necessary to take into account the allegedly large federal holdings resulting from the seizures of bitcoins.

Although Trump's decisions do not always seem motivated by reason, we should accept that he is an astute politician and that he is unlikely to embark on a path that could make him lose votes and donors .

The bright side

The most important conclusion of the Trump explosion is that the importance of Bitcoin has now reached the presidential level. While this may increase the risk of negative repercussions, it also evokes the potential, underscoring how far the concept has evolved: formerly an obscure and complex idea developed by a group of niche coders, bitcoin is now a global phenomenon that attracted not only the support of investors and companies of all types, but also the attention of world leaders.

In the extremely unlikely case that Trump would decide to prosecute Bitcoin, either at the protocol level or at the service level, it will certainly be hotly contested in court. Hearings could generate debilitating uncertainty, but they would push the conversation even further in the direction of clarity of regulation and resulting decisions regarding the limits of federal power, the inherent freedom of the code, and even recognition. the potential of cryptocurrency will have an impact on technological development at all levels.

As I said before, one of Bitcoin's main attractions for investors is its asymmetric risk: the probability that it will reach zero (and the impact this would have on a portfolio) is less than the probability that its price increases by 10x.

Here we have another type of asymmetric risk. The chances that Trump is trying to ban Bitcoin are not zero, but are significantly less important than the benefit to the ecosystem of the high level of conversations. Although the road may be bumpy, when the President of the United States of America talks about the decentralized value of a store of value designed to circumvent the power of established finance, it is hard to deny the change in mindset.

Image of Donald Trump via Shutterstock