This was the part that caught my attention as well, it would be super interesting to see it play in real-time.
For one, how would they even put capital movements controls on crypto? For example, I just have to remember my 12 word seed and I can hop on a plane to another country and my crypto comes with me.
The other part is, wouldn't those capital controls be the last nail in the coffin of "we lost complete control of the situation"?
If the USG (or Europe, or China) still have a strong military, or a lot of influence over the financial sector at that point, you may have a tough time finding a bank to convert your crypto into Fiat. At that point, you’d have to find a country that accepts Bitcoin directly as a payment method or whose financial system can shrug off regulations.
That might be harder to find than you think, or might require a significant haircut on the conversion.
If cryptocurrency exchanges don't exist in good public standing, the price of bitcoin will collapse. This is a risk that does not exist with precious metals.
The real problem with bitcoin is you cannot physically transfer it. I can sell you a USB drive with a wallet on it, but you shouldn't buy it because you can't know if I have a copy of that USB drive in my other pocket. The only way to transfer bitcoin for-real is to submit it to the network and to make sure it's confirmed.
My take is that the censorship-resistant qualities of bitcoin are highly overstated.
The problem is that if you can’t easily convert it, the OTC price is going to plummet.
Since the ledger is public, if the government knows which wallet is linked to you (easy if you’ve done KYC in order to use an exchange), they could also sanction any wallets that transact with your wallet, severely limiting who will be willing to do P2P/otc with you
The minute they try to impose those controls on crypto is the ultimate Streisand Effect moment that will confirm to everyone that they definitely need this asset. I suspect this is why they have avoided it so far.
> The minute they try to impose those controls on crypto is the ultimate Streisand Effect moment that will confirm to everyone that they definitely need this asset.
I'm not convinced. Your scenario relies on people having some deep conviction about the value and usefulness of cryptocurrencies. I think that this is true only for a very small vocal minority of users/buyers. Most people just want to make easy money with it - that's why I think heavy regulation/bans will simply crash the prices instead of leading to a Streisand effect.
I think they avoided it because they were asleep at the wheel when it started getting traction and now limiting it would make a lot of people angry. It's a mess of epic proportions. It's probably the best strategy for regulators to wait for some major collapse (like Tether being exposed as a scam) and use that to introduce counter measures. Meanwhile the negative sum arm race continues sucking more people in.
The Indian government is going to ban it entirely. I'm unconvinced that many Indian investors will want to hold on to an asset which can land them in jail.
in the world where you have heavy capital control, enough to warrant using crypto to escape, the fiat will be worthless to you (hence the capital control!), and thus, others will be willing to accept your crypto instead of fiat!
So, assuming the USG is serious about this, you're probably looking at China, Iran, Russia, Venezuela, or North Korea. Color me skeptical that the captains of industry are headed there.
Depends. Corpors might want to offload, but then again perhaps not, since it would still be valuable in countries that chose to not impose restrictions. Then there's the ability to avoid middle men (both authorities and bankers) while making trades and purchases abroad. For everyone else, it matters little, unless they really need to get on a plane, and fast. But then whatever assets you have to trade for that seat matters less anyway.
The fiat on/off-ramps are the choke points of the whole crypto world. Yes, you could use your BTC to buy Teslas and drugs, but that's it. You can't pay at the supermarket or on the web directly, it all goes through payment providers who are regulated.
Someone needs to cash it out in the end to buy raw materials or bulk purchase food. That's the idea of hyper-Bitcoinization that this step would go away, but I don't see any indication for that.
Regarding localbitcoins or other OTC in person deals I certainly wouldn't want to meet with a stranger and carry $1000 with me in cash to buy his Bitcoins. And localbitcoins was forced to implement KYC, so if Bitcoin gets outlawed or heavily taxed, the state will have a look into their customers.
For one, how would they even put capital movements controls on crypto? For example, I just have to remember my 12 word seed and I can hop on a plane to another country and my crypto comes with me.
The other part is, wouldn't those capital controls be the last nail in the coffin of "we lost complete control of the situation"?