[betwixthewires]

Well, they can try, but even with centralized exchanges, a VPN will do. And then there are decentralized protocols.

Once you have some of your money in cryptocurrency there's no real way for anyone to stop you from moving your money around however you like. The only points that can be controlled are interfaces with banks.

[joe_the_user]

If it's illegal to exchange goods or official currency for cryptocurrency in the nation you are in, the usefulness of cryptocurrency is going to be considerably constrained. This depends on how thorough or draconian the state is but a lot of people just shy away from illegal activity without enforcement being that strong. After all, if buy a tangible good, I want legal title to it and having engaged in an illegal transaction to get the stuff makes that less certain.

[joshgrib]

This is an important point - I think a lot of us tech people like to think "no it only exists on the internet the govt can't touch it! It's like international waters!", but then you have countries that can completely restrict or shut down the internet. As long as the infrastructure exists in the real world and is controlled by a govt, then the "imaginary online stuff" is still ultimately under their control. Even in "the matrix" someone was still running all those computers and could turn them off if they wanted.

[floatingatoll]

Countries can just ask you to prove how you earned income, and jail you if your proof is unsatisfactory to them.

India banning cryptocoins doesn't mean that people will automatically be jailed for mining on day one. It just means that anyone using cryptocoin to avoid paying Indian taxes can end up jailed when their expenditure exceeds their provable income, or when their documented income is traceable to cryptocoin, or etc.

The United States IRS doesn't have to make cryptocoins illegal to convert into currency; they just have to demand that you pay taxes, and have you jailed for tax evasion if you fail to do so. They don't actually care if you earn income through selling cryptocoins for currency, as long as you report the income earned without attempting to evade an honest assessment of value, and as long as you pay your taxes on that income earned.

[x86_64Ubuntu]

At least concerning the tax issue, the US government doesn't even need to do that. If they squeeze the credit card and banks as they've done for the adult industry and marijuana industry, we will see the entire market deflate. The only reason crypto is okay in the West is because an offramp into fiat is provided. Once that offramp gets closed, it's game over and we are back to 2010 in terms of crypto value.

[floatingatoll]

The US has instead taken the view through various upcoming 2022 IRS procedural rules that — as long as there's a complete paper trail documenting who the origin of, and who is responsible for paying taxes for, the cryptocoin when it is converted into currency — then there is no harm in offramps that collect tax ID information and report it appropriately.

Their focus on requiring "origin of and taxation of" attestation may impact the perceived value of cryptocoins when traded for currency, but they don't seem to much care if people want to generate hashes and sell them to each other, just as long as it's not used to launder money or avoid taxes.

It is of significant debate whether the perceived value of cryptocoins is in part due to its value for both laundering money and avoiding taxes, but that's distinct from whether the perceived value is in part due to the ability to sell cryptocoins for currency.

[Zamicol]

Eventually efficient systems will implement zero knowledge proofs. Not necessarily because of "privacy", but because of the efficiency gains of such a system. Privacy is just a bi-product of this information theory reality.

[abduhl]

The efficiency gains of these systems are irrelevant. Governments of the world want monetary control, and they cast that desire in the form of laws like "know your customer" or "anti-money laundering." These laws are antithetical to what you're talking about. If the government requires legitimate institutions to implement these forms of laws then to engage in actual society (i.e. - school, groceries, business, rent, banking, and most importantly taxes) then the existence of zero knowledge proofs and their implementation are irrelevant. At some point you come back to the inescapable problem with crypto: the real economy is based on trust and an immutable digital blockchain is, at best, a gloss on this system.

[Zamicol]

Many chains, L1's, defi products, etc., have already expressed their eagerness to comply and implement KYC and other regulatory controls.

My warning is that the open-source Pandora's box of zk proofs is necessary, technically feasible, and inevitable. ZK proofs are coming, and there will be systems built on top of them. Our governments and societies need to be ready for this reality.

[abduhl]

You're missing the point. It doesn't matter what the technology can do. There is a system that currently exists, and that system will protect itself through regulation. Cryptocurrencies will come within the fold or they will be outlawed. It is irrelevant what is technologically feasible. Governments and state actors don't exist in stasis, any advance in technology will be met with an appropriate response even if that response is "banks are not allowed to accept any funds that have any connection to X cryptocurrency." If that doesn't work, the response will be "banks are not allowed to accept any funds without perfect knowledge of the two parties transacting and where the cash is coming from." What bank would possibly risk going against the government? Even the well-known money laundering banks balk in the face of government scrutiny. What company would possibly risk losing their relationship with their bank?

Cryptocurrency fanatics think that they can digitally outcompete physical reality. They cannot. The governments of the world are the Borg - you will be assimilated.

[exo762]

You are wrong in a subtle way. Yes, if you are doing scaling, than adding hiding using zk is almost free. Problem is - you are hiding things from literally everyone. And while it works for payment systems like zcash, it is a problem for most of DeFi. For some protocols it is impossible (there is proof that you can't do it for AMMs, like uniswap). In general case implementing zk means you need to have a separate layer of information delivery that is capable of discerning parties that Need To Know from the rest.

[sofixa]

> I think a lot of us tech people like to think "no it only exists on the internet the govt can't touch it! It's like international waters"

Do people really think that today? I did, when i was a teenager discovering the Internet, and then quickly realised how naive that is when my favourite torrent site got taken down, and when a public digital library website got taken down like a terrorist organisation with a SWAT team taking their servers.

[rip_netrunner]

Ah yes, the easy solution is just to ban all the exchanges. That'll do it! And then they'll just have to ban the peer-to-peer decentralized exchanges (dydx, sushiswap, uniswap, xrpl). That might be a little tricky though...

It's just like governments trying to ban torrenting and p2p file sharing. Look at how well THAT went.

[csomar]

This gets repeated a lot around here but is far from the truth. Drugs are still traded, and so are other "illegal" items. And trading drugs is quite risky comparing to trading crypto (especially fully decentralized).

> usefulness of cryptocurrency is going to be considerably constrained

Sure, but you are missing why 3rd worlds like China, India and Morocco are trying to restrict crypto. They are worried about capital outflows. It's not a surprise most of these countries already have rigid capital controls. People who have decided they want to "outflow" their capital are not really worried about government restrictions.

[louloulou]

Yeah, people making these arguments haven't lived in developing countries with terrible, inconsistent, reactionary, arbitrarily applied laws. Where you have to "break the law" constantly in order to survive.

[joe_the_user]

Sure but bitcoin's value would be a lot less if it was only being used to skirt the abuses of third world regimes - and when those same third world regimes make illegal.

Most people who buy bitcoin today in the first world do so because it's made money for people.

Sure, in third world countries and elsewhere, people skirt or break the law on a regular basis. But they still don't it for kicks and they don't do it for "right to cryptocurrency", they do it because it will get them something and making crypto illegal will mean it gets people less and people use it less, reducing demand and price (minus the manipulation bitcoin experiences but at some point that manipulation won't be manageable).

[TheProbes]

The goal of drugs is to do the drugs. They are consumer goods. You buy them, then consume them. Crypto has no value unless you can sell it on to someone else, and that's it's ONLY value. That is the glaring difference, and it's weakness.

[wyager]

This isn't true if your objective is just to protect wealth long-term. If bitcoin is "banned" in India (you can't exchange it for INR on an exchange), you can still "use" it in the sense that you can acquire it illegally or overseas and then hold onto it. Your liquidity is limited but this is a small downside long-term.

[joe_the_user]

This isn't true if your objective is just to protect wealth long-term.

I said illegality constrains the usefulness of cryptocurrency. Long-term gains is one of the remaining hypothetical uses but other uses are limited. So your claim doesn't refute my point. With fewer practical uses, we might see bitcoin's long terms value decline but that's speculation.

[wyager]

Wealth storage is a practical use case. This is a weird thing to grasp, but it's actually perfectly reasonable (I.e. utilitarian and stable) for an asset to be "purely monetized", in the sense that it has no value whatsoever except from its capacity to store value.

That said, you're right that ability to actually spend bitcoin probably shows up in any PDE that accurately models its market dynamics. If 90% of countries on earth ban bitcoin, and those bans are well-enforced, bitcoin probably won't be very valuable.

[joe_the_user]

Wealth storage is a practical use case.

It's one practical use case. Bitcoin's value rests on multiple use cases and eliminating other uses cases reduces demand for bitcoin. And that effect also reduces bitcoin use for wealth storage (but might not eliminate, sure).

[santiagobasulto]

That is why drugs and other illegal things are so cheap, right?

[BobbyJo]

Drugs are actually very expensive relative to production costs because of the added risks. Marijuana, for example, is a very easy crop to grow. There isn't any reason it should cost more than any given spice per gram. However, since it was illegal, street vendors could charge significant markup because 'shoe-leather' cost is very high. Now that it's becoming legal, the gov is extracting the difference as taxes, keeping prices high for revenue.

[edgyquant]

I’m not sure what your point is? You’re kind of proving them right. I guess you’re trying to equate drugs with crypto, saying if it was criminalized it would spike in price, but that’s a false equivalency. Drugs provide a utility all on their own they depend on users speculating about them just to have value. If anything the inverse applies here, but for the same reason, a currency that the government doesn’t want you to use will have less value because you’ll only be able to exchange it with nefarious organizations who can pick and choose the price. Drugs are expensive because the risk of them being illegal is factored in and the suppliers can demand whatever they want.

[joshgrib]

I think they're expensive exactly for that reason - people have to factor in the risk that someone would be totally legally justified to come and take all their stuff tomorrow. Those are also actual products with a true value to people - not a currency

[frazbin]

</sarcasm> <!-- apparently needed --!>

[sMarsIntruder]

Wrong.

[Levitz]

Could you please argue how it is wrong? The logic seems pretty simple to me. A currency has value as long as it is exchanged, if government restricts exchanges, the currency drops in value.

[sumtechguy]

Hmm, I can take a stab at this and probably be wrong myself.

Money like everything is a market. There is a supply of money and a demand for money. If the demand remains constant but the supply is curtailed in some way I could see the value of the good exchanged going up. Now if you make the argument that this action would decrease the demand then yes the value should go down?

[cormacrelf]

If you cannot use it for anything, and maybe it's illegal to even own it, why acquire it in the first place? It is demand that decreases. Supply that goes down simply to match lower demand does not necessarily outpace it and produce an overall price increase.

The difference between this and something like the 1920s alcohol black market in the US is exactly the point that people are raising when they talk about cryptocurrency lacking fundamental value. Alcohol has fundamental value (it is a drug with some effects that have proven to be valuable to many humans for thousands of years), but a currency does not have any value in isolation. People didn't stop wanting alcohol when it was banned, but they will stop wanting a currency if it is banned. It will not have a similar "constrained supply driving up the prices" effect to black market alcohol, because alcohol's demand never wavered but demand for cryptocurrencies will. It is not irrational to buy black market alcohol that you can drink or sell, but it is irrational to buy black market currency that you can neither drink nor sell.

This is all made generally moot if India is the only place to ban it, because they won't make a huge dent in the global market.

[PeterisP]

Why would you assume that the demand remains constant?

Demand for a cryptocurrency is set by some combination of (a) it's utility as a payment tool and (b) it's value as an investment vehicle.

Legal restrictions reduce it's utility as a payment tool, driving down demand. They also disallow a significant group of investors from using it for investment, both reducing demand, and temporarily increasing supply as many legitimate investors (especially institutions) would have to sell off their holdings before the law coming into force. There's no obvious mechanism how these restrictions would somehow curtail supply more than the demand.

[ProfessorLayton]

>The only points that can be controlled are interfaces with banks.

That's... A big deal?

[lottin]

Yeah, well, basically they stop you from cashing out, which means your crypto-holdings are worth zero to you, whatever their market value.

[betwixthewires]

It is a big deal if you're only speculating and need to cash out. But if you can buy goods and services informally in these currencies, or use tools like stablecoins to speculate on network, it's really nothing to worry about.

[YetAnotherNick]

> Once you have some of your money in cryptocurrency

That is a pretty big condition. Most of the people who buy crypto wants to buy from some trustworthy site, and if that is stopped there will be effectively zero new crypto being brought inside the country. Also no one knows how much hassle will it be to convert it into money in bank, this is likely to stop almost all trades.

[ngokevin]

How are you supposed to turn the coins into FIAT where it's actually usable?

At that point, you cannot move your money around however you like, you can only move the tokens around on the blockchain.

[ashwagary]

Gift cards and p2p exchange for fiat using a dex or another service. As long as there is money to be made, the Indian crypto black market will thrive and grow.

[mise_en_place]

Who exactly will be making money? Bitcoin is already extremely illiquid, regulation like this will make it even more illiquid. What a ludicrous take.

[ashwagary]

>Who exactly will be making money?

The holders obviously.

Bitcoin allows any Indian with a cellphone to easily exploit global arbitrage opportunities (BTC/INR and */INR to /) , bypass capital controls, and save money in a medium that the Indian government cannot debase. At least a few million people (especially the international traveler class) will find these characteristics extremely valuable whatever the status of local regulation.

[mise_en_place]

Forgive me for being skeptical, but I’ve never seen Bitcoin used as a medium of exchange. You could argue it’s a store of value, but that’s also contentious. In the last year, it’s back to its original price. So much for being an inflation hedge.

[ashwagary]

>In the last year, it’s back to its original price.

Ignoring the 6,000,000x return over the last 12 years to make a point about it being flat in the short term? Not a great counter attempt.

[ngokevin]

So meeting strangers at a cafe.

[tiborsaas]

Worst case is to buy some physical goods and sell it. A bit cumbersome, but not impossible.

[PeterisP]

In this case, no legitimate seller would be allowed to sell you physical goods for cryptocurrencies - you'd have to buy some physical goods abroad and then import them or the money (India does not have free movement of capital across the border).

[rodolphoarruda]

Just checking possibilities here. Let's say you want to buy my house and I want to sell it to you. We are in India. You transfer crypto to my wallet then I, in return, donate my house to you. Would this donation work on the legal papers today? I suspect that in Brazil, where I live today, it would.

[PeterisP]

Sure, a black market is possible - I explicitly mentioned legitimate sellers.

But why would you want to sell a house this way instead for a permitted means of payment? Even if your scheme is unlikely to be detected, if does add a nontrivial risk of getting detected (or getting intentionally exposed, or blackmailed to get exposed) and get very unpleasant consequences for that, and given the extra difficulties of enforcing the deal, you would likely expect a significant extra markup above "normal price" to sell the house this way. Furthermore, if this is criminalized, then even offering or requesting this as an option carries some risk.

Also, I'm not informed of Indian law, but in most western countries this "donation of house" would definitely incur a significant tax and possibly trigger a tax audit/money laundering investigation. Combined with the risk markup, that would meant that laundering cryptocurrencies would be somewhat expensive. Not impossible, of course, money gets laundered - but it would mean that you would actually have to follow all the inconveniences, risks and costs of a money laundering process if you'd want to handle cryptocurrency, and that would discourage many people from doing so.

[betwixthewires]

> But why would you want to sell a house this way instead for a permitted means of payment?

I can think of a few reasons. The buyer offers you a large premium, you know people who can help you offload the currency, you have no interest in keeping your capital in a controlled environment, maybe you're selling your house because you're leaving a country and taking bitcoin or whatever is the easiest way to take your capital with you.

[diab0lic]

Two major issues with this;

1) I'm not familiar with tax laws in India (or Brazil) but in many places this would trigger gift taxes, imposing a large financial overhead to this transaction.

2) The regulatory bodies monitoring for illegal transactions will see right through this one.

[lottin]

> You transfer crypto to my wallet then I, in return, donate my house to you.

How would that work? Can't you just not donate the house, after they have given you their crypto?

[rvnx]

Exchange your cryptos in a juridiction abroad where it's allowed (e.g. Singapore), and spend those savings. Problem solved. No ?

[betwixthewires]

Well obviously there's going to be a level of trust seeing as recourse is narrower, just like any black market transaction. Maybe even some possibility of extralegal recourse. But people can and therefore will do it.

[YetAnotherNick]

How are you supposed to trust the person who you are buying goods from will deliver once they receive the payment. As they will anyways be illegaly selling the goods for crypto there will be even more mistrust. If you do payment after delivery then the other side needs to be trusted.

[tiborsaas]

Maybe doing your research before buying something online same as with cash payments is a good idea. I'd pick a vendor who accepts crypto besides fiat, I assure you there are lots of them.

[YetAnotherNick]

The point is that there might be no public info. If you can research using public info, then government could research too of the places which delivers goods for crypto and could order one for themselves and track the package through courier.

[tiborsaas]

You are taking this too seriously. Do you really think that the Indian government will start investigating every incoming package to the country if the webshop it originated from accepts crypto? In a country if 1.3B+ people?

[BitwiseFool]

If you are willing to break the law and risk being caught, sure, there is no way to actually stop from transacting using decentralized protocols. But there are plenty of other ways for the government to find out whether or not you are using crypto. Your bank will definitely keep tabs on your fiat transactions and continue to report KYC/AML information. Current KYC/AML is actually pretty good at detecting anomalies in cashflow and spending. Sure, you can lie about all this stuff but you might just be digging yourself into a hole.

[instagraham]

The interfaces have almost been reduced to a couple of options: A single mobile wallet, or P2P.

A ban would force the wallet's company to stop allowing its use on crypto exchanges.

[jazzyjackson]

not just banks, but everywhere you can spend it in country. fine you can move money between virtual accounts and buy NFTs all day, but government can control whether local business are allowed to accept your crypto as payment, so you’ll need to liquidate crypto into local currency - which kind of sucks to do if the banks aren’t there to help.

[xtracto]

This hasnt been a problem forvseveral years. There are different options:

- buy international prepaid cards for legal dervices (bitrefill)

- use p2p local crypto exchanges: localcrypto, localmonero (in some countries this can be 100% anonymous by using the "withdraw from atm with 1 time code" bank services)

- Exchange to alternate "tokens" that are legal (anyone remembers Linden dollars to BTC market around 2010?)

- Exchange locally via sneakernet.

[LegitShady]

>buy international prepaid cards for legal dervices (bitrefill)

within the country, you'd be committing a crime acquiring stuff using crypto. The cards are international but you're committing the act locally.

>use p2p local crypto exchanges: localcrypto, localmonero (in some countries this can be 100% anonymous by using the "withdraw from atm with 1 time code" bank services)

Will all be banned and illegal services. If it touches a bank you'll likely get extra charges on top for money laundering or similar.

>Exchange to alternate "tokens" that are legal

That will be tracked by the government if legal, or illegal if not tracked.

>Exchange locally via sneakernet

"exchange on black market"

None of these things are solutions.

[betwixthewires]

Your point boils down to "but it will be illegal." The point you're responding to that you missed was "it doesn't matter if it is illegal, people will do it." All of those are just examples of ways to avoid getting caught. They're not solutions to it being illegal, they're solutions to getting caught.

[jazzyjackson]

I think there’s a distinction between “people will do it even tho its illegal” and “illegality prevents mass adoption” - the government still achieves its goals if the only opportunities to transact with crypto are mired in legal risk.

[betwixthewires]

"Mass adoption" is a buzzword that means "a lot of people use it." In it's purest form it means everyone uses it, but that's not absolutely necessary to consider it widely used.

There are plenty of things in ubiquitous use that are illegal in some places, or even most places. Alcohol is ubiquitous, guns are everywhere, gambling, cocaine and marijuana come to mind, people modify their cars beyond legality quite often. Lots of people do illegal financial activity as well, most people transact under the table when the opportunity arises. You can have a scenario where cryptocurrencies are widely used even in places that ban them but are so ubiquitous that enforcement is untenable.

[EugeneOZ]

Every option looks risky, people will not use it widely.

[Hooray_Darakian]

Enforcement doesn't have to be perfect to curtail major usage.

[mathnmusic]

Banks can block accounts of centralized exchanges (and have done so in the past when govt asked them to). And once conversion from and to fiat money is disabled, there's very little value left in cryptocurrency.

[petilon]

Unless you want to spend the money abroad.

[idiotsecant]

If they make owning crypto a crime it becomes just a matter of showing that you used it then they put you in a concrete box for a while.