The One Way Governments Could Actually Kill Bitcoin...

Tyler Durden's picture

Authored by Simon Black via SovereignMan.com,

Something pretty miraculous happened recently.

It appears that Jamie Dimon, CEO of JP Morgan Chase, went nearly TWO WEEKS without bashing Bitcoin.

This must be a record for Mr. Dimon, who seems to have barely been able to last an hour without calling out Bitcoin as a “fraud”, or a refuge for criminals and North Koreans.

Mr. Dimon finally broke his Zen-like meditative silence late last week, once again returning to the familiar assaults we’ve come to expect from the world’s most powerful banker.

On Thursday, Dimon downplayed the importance of Bitcoin during a teleconference with journalists, and then said he wouldn’t talk about cryptocurrency anymore.

One day later, Dimon was talking about cryptocurrency again, this time at the annual meeting of the Institute for International Finance.

Dimon’s rant was in top form, and he went back to his core material– governments won’t allow Bitcoin to exist, it’s only useful for criminals, etc.

He was later joined by his sidekick Larry Fink, Chairman and CEO of Blackrock (the largest investment management firm in the world with over $5.7 trillion under management).

Fink stated succinctly that Bitoin is “an index for how much demand for money laundering there is in the world.”

Now, these are clearly not dumb guys. Dimon and Fink are princes of Wall Street. They know finance.

But it’s pretty obvious they haven’t done their homework on cryptocurrency… since there’s really no objective evidence to support their assertions.

Dimon’s idea that Bitcoin is a “great product” for criminals is simply WRONG. Bitcoin is terrible for criminals.

Why? Easy. Bitcoin is not fully anonymous. Every single Bitcoin that has ever been mined… and every single transaction in Bitcoin that has ever been made… is recorded in the Blockchain.

In other words, it’s all public information.

That’s not to say that people’s names and addresses are recorded in the Blockchain; instead, a typical transaction record includes information about Bitcoin Wallet IDs, block numbers, etc.

[Visually, it looks something like this]

But for people with enough resources (i.e. governments), the transactions can be traced back to the source.

Here’s an easy example.

Let’s say Alvin the Arms Dealer signs up for a new account at Coinbase– the most popular exchange in the world.

Alvin links his Coinbase account to his bank account at, say, hmmm… JP Morgan Chase, and puts in an order to buy 100 Bitcoin.

The money transfers from JP Morgan to Coinbase, and Alvin’s Coinbase wallet is credited with 100 Bitcoin.

Alvin now sends those 100 Bitcoin to his friend Marvin the Money Launder.

Marvin sells the Bitcoin at another exchange, and deposits the US dollars into his own bank account.

EVERY SINGLE ONE OF THESE TRANSACTIONS has been posted to the blockchain.

And if the FBI or INTERPOL really looks into it, they’ll be able to trace Marvin’s bank deposit back to Alvin’s initial purchase of Bitcoin at Coinbase. Boom. Smoking gun.

In other words, if you’re the FBI, you should HOPE that criminals use Bitcoin. They’ll be easier to catch.

But any criminal with half a brain [oxymoron, I know] is already aware of these issues. So they’ll probably stick to Amazon.com giftcards… which is a MUCH easier way to launder money.

The other laughable point that Dimon makes is that ‘governments won’t allow Bitcoin to exist’.

He believes that governments want to remain in control of money, so at some point they’ll merely outlaw Bitcoin. And poof… demand will vanish.

This is a completely naive view.

Marijuana been illegal under US federal law for DECADES. And yet demand only grows.

Pirating movies is also illegal. And those rules have been aggressively enforced since the passage of the Digital Millennium Copyright Act nearly 20-years ago.

But illegal downloads of movies, music, software, etc. still constitute roughly 25% of all Internet traffic, according to a study commissioned by NBC Universal.

Bitcoin would be even harder to control. You don’t even need to be connected to the Internet in order to receive or store Bitcoin. So fat chance they’ll be able to enforce a ban.

Any attempt to get rid of Bitcoin would be about as successful as preventing people from smoking weed or pirating the latest Game of Thrones episode.

But… Uncle Sam does have one weapon… one way they could potentially disrupt Bitcoin.

Some day the US government and Federal Reserve might actually wake up and realize that crypto is the future.

And when that day comes, the obvious tactic would be to create their own version of the Blockchain that uses “crypto-dollars”.

Cryptodollars would be equivalent to US dollars. So $1 in physical cash = $1 in your bank account = 1 cryptodollar.

Cryptodollars would be legal tender and accepted everywhere in the country– Wal Mart, Amazon, etc., but without any of the wild gyrations and fluctuations that we see in the Bitcoin price.

The introduction of cryptodollars would clearly have an impact on the demand for Bitcoin.

Hardcore users would certainly still hold Bitcoin, so it wouldn’t go to zero.

But casual users might very well abandon Bitcoin in favor of cryptodollars due to the convenience of being able to spend them anywhere.

The added benefit to the US government is that a crypto-dollar blockchain would solidify the dollar’s status as the international reserve currency.

So they definitely have compelling reasons to do this.

Now, it might never happen. Or it could take years.

But the possibility exists. So keep that in mind before going ‘all in’ on crypto.

And to continue learning how to safely grow your wealth, I encourage you to download our free Perfect Plan B Guide.

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Creepy_Azz_Crackaah's picture

tmosley... paging tmosley...

Kafir Goyim's picture

The added benefit to the US government is that a crypto-dollar blockchain would solidify the dollar’s status as the international reserve currency.

What if Russia does it first?  What if there were a crypto-ruble?

Silver Swan's picture

According to Gresham's Law, this would not kill Bitcoin. It would only force bitcoin holders to purchse crypto dollars when it was time to pay taxes. The rest of their savings would/could be held in Bitcoin.

NugginFuts's picture

Seems like it would make a Bitcoin competitor, but not necessarily a Bitcoin killer. There's already over 1k different competitors. Does "govt sanctioned" make this one more appealing to the crypto community?

Me thinketh not. 

tmosley's picture

Crypto dollars eliminate the primary barrier between fiat and crypto. Anyone who thinks such a move would hurt Bitcoin is fooling themselves.

silverserfer's picture

tales from the  crypt-keeper. I mean tmosley

 

 

 

 

City_Of_Champyinz's picture

LOL...My only question is how fucking stupid does a criminal have to be to open a bank account in is own freaking name to buy bitcoins so that he is 'anonymous'? 

Stuck on Zero's picture

The really nice attraction of crypto-dollars is that the Fed could create an infinite number of them, and they'd be untraceable, too!

Hugh_Jorgan's picture

"He believes that governments want to remain in control of money, so at some point they’ll merely outlaw Bitcoin. And poof… demand will vanish. This is a completely naive view."

Unless the law abiding users of Bitcoin, et al, are served similarly by a raft of .GOV-issued replacement crypto-currencies. This coupled with legislation and mandated removal of all non-sovereign-issued crypto from any/all exchanges. Any involvement, (real or invented), will carry 10yr/$10k fine for say; owning a computer with a connection to, or software for, unsanctioned blockchain networks? VPN and and Proxy providers could be forced to comply or be prosecuted as well. I think something like this is what's coming after an economic reset, the clock is ticking. Best to have an exit strategy ready, IMHO.

Four chan's picture

money laundering hell, i just want to get the stuff i traded

 

my life for out of the hands of the relentlessly devaluing jews.

Placerville's picture

There is no difference between Crypto US dollars and US Fiat dollars except traceability and greater gov't control. Both can be created to infinite amounts, unlike Bitcoin. They are also not accepted worldwide without using a currency exchange in most instances. US Crypto may not even be accepted anywhere outside the US and territories. A total non-started of an arguement. I would insist on Bitcoin for any payment instead of US Crypto.

Bitcoin = CRYPTO

US Crypto = CRAPTO

nuubee's picture

Simon Black should be ashamed of himself, this is yet another retarded argument as to how governments could kill crypto. 

Simon seems to forget that the PRIMARY USEFULNESS of blockchain technology is the distributed auditing of the transactions. This distributed auditing ensures that no single party is able to forge transactions and simply take coins that are not theirs.

Guess what happens when you centralize the auditing, i.e., put a government in charge of auditing the blockchain? That's right, fraud happens. 

Say it with me now:

1) TORRENTS HAVE PROVEN THAT DECENTRALIZED NETWORKS WIN OVER CENTRALIZED NETWORKS

2) GOVERNMENTS CANNOT CONTROL DECENTRALIZED NETWORKS.

3) HENCE, GOVERNMENTS CANNOT CONTROL A CRYPTOCURRENCY THAT IS SIMULTANEOUSLY USEFUL AND TRUSTWORTHY.

4) HENCE, GOVERNMENTS CANNOT CONTROL CRYPTO.

 

The end result is, governments will finally lose control of money.

end of line.

in4mayshun's picture

...5) Government can track then prosecute you for financial crimes...without ever "controlling" crypto.

S.N.A.F.U.'s picture

It's like some people on ZH have never heard of civil asset forfeiture despite the many ZH articles on that exact topic.  The person doesn't have to be guilty, only the asset has to be guilty.  With the ability to track every single bitcoin transaction (a feature built right into the technology, a feature that can not be removed), all government has to do is let crime happen and take note of which bitcoins are guilty.  Eventually most of it will end up "tainted".  They'll call it "blood bits" or something.  Then they simply demand all of the guilty assets be forfeited.  At that point anyone who does not submit their guilty assets will be considered guilty of obstruction and a zillion other charges.  No amount of cryptographic block-chaining can protect anyone from that.  Anonymity would be the only defense (they can't arrest you if they can't figure out who you are), and bitcoin doesn't provide anonymity.  Some long time holders may have "clean bits", but once the government starts its attack who will risk accepting such bits?

TuPhat's picture

Simon obviously knows nothing about money laundering.  His example is ludicrous.

Oliver Klozoff's picture

"Marvin sells the Bitcoin at another exchange, and deposits the US dollars into his own bank account."

lol


The Alarmist's picture

Amazon giftcards are ok, but video poker is even better for money-laundering, if you pick the right machine. I'd tell you to ask arms dealer Stephen Paddock, but someone capped him and shot up a concert full of people with his wares.

funthea's picture

Half of all bitcoins are held in less than one thousand wallets. In your bitcoin utopia where bitcoin surpasses all know currencies, how do you reconsile the vast over dominance of these un-elected purveyors of the God-like bitcoin? You have thought about this, no? I mean, since you scoff at the economic law of substitution, surely you've thought this out...

tmosley's picture

Those wallets include exchange and institutional wallets. And the bottom 58% of wallets have less than $6 in them. Abandoned dust accounts.

Bunga Bunga's picture

No one ever claimed that Bitcoin is a socialist experiment. It is hardcore free market - survival of the fittest. The old elites will be replaced by new elites soon.

cronian's picture

The old elites just need to track down the new elites and steal their bitcoin. Then, once JP Morgan Chase owns all the Bitcoin, Jamie Dimon can start talking it up. 

Gaius Frakkin' Baltar's picture

What's ownership percentages for gold?

overbet's picture

most fiat is held by the 1%. whats your point?

JustUsChickensHere's picture

They wont do it - for another reason. Currently USD (and other fiat) can be 'frozen' (almost the same as stolen)... but if it is on a blockchain, the government(s) would lose the power to block transfers..  they never give up any power advantage.

btClunker's picture

Currency competition, sound's good to me. 

myne's picture

Easiest way for a government to kill it is for them to ask their central banks to run exchanges.

Charge low fees but never ever spend them.

In time, they'll control enough to kill liquidity. 

Or simply wait. People die, lose keys. 

 

 

 

Bunga Bunga's picture

You can bypass exchanges in many ways. There is no exchange monopoly possible.

myne's picture

A long enough timeline is all they need.

Their reputation will be impeccable. They can print anything hacked or forgotten. 

chubbar's picture

The winning play is someone coming up with bit-gold. One bit-gold = .001 grams of gold held in a depository that is audited twice a year. The bit-golds are redeemable in gold and you can bring gold to the depository and exchange for bit-gold. There is a transaction fee that pays for the administration, similar to goldmoney.com. The price of the bit-gold is posted daily to account for the price of gold in the market place and it is scored against all major currencies, similar to the "free gold" concept. I'm sure there are smart people that can design this so that it works and is a fair representation of gold in storage. Seems like a no-brainer so I wonder why it hasn't been implemented? Maybe only a sovereign is large enough and powerful enough to make this work?

Bunga Bunga's picture

You have to trust too many people, in contrast Bitcoin is trustless = game changer.

Dabooda's picture

Mind-boggling, isn't it?  All the solid Austrians say only commodities with intrinsic value, like precious metals, can be money.  But Bitcoin's immateriality actually makes it harder to steal/tax/confiscate and easier to transact with electronically than PMs.  Game changer, indeed.

And government-issued cryptos are unlikely to be competitors BECAUSE of trust issues.  Anything government can issue at will is guaranteed to decline in value.  Bitcoin supply is mathematically limited, so it is much more likely to appreciate in value.  Given a choice between a guaranteed value-loser and a likely value-gainer, guess which alt-coin will attract the most customers?

logicalman's picture

Money and currency are not the same thing.

BitCoin is a currency.

DisorderlyConduct's picture

Bitcoin is limited right up until a majority of miners decide to update and making the limit 42MM bitcoin. What's to stop a consortium of miners from doing this? And why not - everyone wants more money... Greed exists and mostly it's a good thing. But not always.

For that matter I imagine it's the exact same as the US went off the gold standard. The ones in power decided and it was so - out of greed and lawlessness. There is nothing to stop a similarly - minded group from effectively doing the same to bitcoin. It's baked in. Unless someone is going to say human nature and power struggles don't apply to bitcoin.

myne's picture

Where's the spread? 

How does the issuer cover costs? 

DisorderlyConduct's picture

That removes the 'win the lottery' aspect of bitcoin. Pinning the price to gold makes it too stable to attract get - rich - quick buyers.

Anasteus's picture

You're right. Although the idea in the article has some merits, none cryptocurrency (CC) issued by the establishment can truly compete with Bitcoin. Firstly, no one sane would believe such a state CC is not rigged and the establishment doesn't have full control over the CC under the hood. In other words, the "state CC" would be yet another fiat fake just veiled by cryptocurrency PR label. Secondly, if even the state CC were a genuine CC built up on the same solid basis as Bitcoin, the bankers would certainly mine up the majority of the limited amount to keep the dominance. Spreading just, say, one third of the overall volume into circulation would do the job.

GlassHouse101's picture

Only the most honest, and trustworthy people agree there is a place for blockchain:

1 - Christine Lagarde
2 - Blythe Masters
3 - Bill Gates
4 - Ben Bernanke

Raffie's picture

No one can escape the Long Neck of Christine Lagarde.

esum's picture

please remind.....how many BILLIONS has Dimon/JPM paid in fines for CRIMINAL ACTIVITY ...but never prosecuted...

 

 

Raffie's picture

If the 6 mile wide iron asteroid hits Earth that will end the crypto argument.

Anything is possible, even creating gold/silver atom by atom on a full scale production using the Earth's magnetic field to power it all. Endless power. Making gold/silver worthless.

Since no one has a working crystal ball who can say? It's all fiction either way till it is proven other wise. 

silverserfer's picture

well the future has already been unveiled by this tale of the past..

https://www.youtube.com/watch?v=2a1LV1IeG8U

PacOps's picture

Time well spent.

 

Thx for the link.

 

BallAndChained's picture

tmosley wants to build a rocket containing tons of mining equipment and robot miners, fly thousands of light years, and go to the site of that neutron star collision to mine that gold in space. By the time he gets there, the material would have combined into a planet.

Hmm, isn't earth in space too? Why go through the huge expense of going into space when the earth is already in space LOL.