Over the last several years, bitcoin (BTC) has gained notoriety in the public eye as a borderless digital store of value away from government control. Freshly-surfaced comments from President Trump show alleged additional anti-bitcoin sentiment. Would the United States government ever ban bitcoin, similar to 1933, when President Roosevelt forced gold out of the pockets of citizens? Given bitcoin’s decentralized and digital nature, is such a scenario possible?
“I think it’s highly unlikely that the U.S. government outlaws bitcoin like it did with gold in 1933 with executive order 6102 which was part of the Emergency Banking Act and triggered by the Great Depression and the former gold standard of the U.S. dollar,” Marshall Hayner, early bitcoiner and CEO of crypto payments outfit Metal Pay, told me in a direct message on June 16.
[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]
Trump’s Anti-Bitcoin Lean
Trump tweeted about crypto’s largest asset in 2019, describing himself as “not a fan of bitcoin.”
New information shows another account of President Trump’s negativity toward bitcoin, detailed in a book by John Bolton, a previous national security advisor, a June 18 Forbes contributor article detailed. The book has not yet been published.
Bolton’s book allegedly details a May 2018 discussion in which trump told Steven Mnuchin, U.S. Secretary of the Treasury, to “go after bitcoin [for fraud],” amid talks on global trade, according to an article from the Washington Examiner.
Gold Pushed Out In 1933
If the U.S. eventually tries to influence citizens to give up their bitcoin, it would not be the first push of its kind. In midst of the Great Depression, the U.S. government approved the Emergency Banking Act of 1933, according to the Mises Institute’s 2008 article. Thanks to the ruling, out of stated fear for the monetary system, which hosted gold-backed U.S. dollars prior to the act, the government could essentially seize citizens holdings of the precious metal.
Shortly following the decree, President Roosevelt “ordered all individuals and corporations in America to hand over their gold holdings to the federal government in exchange for an equivalent amount of paper currency,” the Mises Institute wrote.
The government also put other measures in place, such as banning entities from demanding gold as their only method of payment, as well as removing gold as a measure of value, the Mises institute added. Additionally, the U.S. removed the dollar’s gold backing, meaning citizens could no longer exchange their paper dollars for their gold equivalent. U.S. citizens could not pocket sizable stores of the precious metal again until 1974, thanks to a ruling approved by President Ford, History.com stated.
Bitcoin Different From Gold
Run by a network of computers, called miners, across the globe, bitcoin lies outside government reach, to an extent. Users can also hold bitcoin themselves offline. Although every bitcoin transaction is recorded on an immutable online public data base, these transactions are anonymous, showing only strings of characters.
A number of exchanges, especially in the U.S., require customer verification for bitcoin purchasing. Once a customer buys bitcoin and sends it to a location off the exchange, authorities technically could follow the transaction to its destination, essentially knowing the holder’s identity. Buying bitcoin in a person-to-person fashion off exchanges, however, might potentially negate this tracking ability.
Could Bitcoin See A 1933-Esque Fate
“Bitcoin is a non-state-sponsored currency,” Hayner explained. “That being said, I think the most likely action we will see are aggressive anti-money laundering and anti-terrorism guidance from the Treasury, FinCEN and OCC as how to handle digital assets,” he added, referring to the Financial Crimes Enforcement Network and the Office of the Comptroller of the Currency.
Noting the current economic state of unemployment and expected inflation laid out in a June 12 Monetary Policy report from the Federal Reserve Board of Governors, Hayner said he expects upcoming changes that will expedite paper-based U.S. dollar extinction in the coming years.
The CEO also pointed to a U.S. central bank digital currency (CBDC) coming into play, in part, out of competition with China’s CBDC. A U.S. CBDC, matched with technology exports, might help get the American economy back on track, he added.
“Bottom line: it would be nearly impossible to censor bitcoin transactions without creating a sweeping internet censorship program akin to CCP’s ‘Great Firewall,’” Hayner said, referring to the Chinese Communist Party and its web blocking efforts.
“Even in mainland China, when I travel there, I never have any problem making crypto transactions!” Hayner said. “Accessing Facebook, however, is another story,” he added.
Bitcoin Ban Unlikely Anytime Soon
Derivatives trader, YouTube content creator and organizer of The Financial Summit, Tone Vays, did not rule out the potential for a government bitcoin ban similar to the gold situation in 1933, given the asset’s rising mainstream financial presence, although such a ban is doubtful. “But I am not ruling out a 1933 event in say 2033,” if owners do not hold actual bitcoin themselves in their own wallets off exchanges, as well as operate bitcoin nodes, given bitcoin gains significant public acceptance in the coming years, Vays told me in a message on May 18.
“Say they use Coinbase wallet and invest using an ETF [exchange-traded fund], then it’s possible for the government to take possession of over 50% of all the bitcoin with a text message just like they confiscated gold from the banks holding it on people’s behalf,” Vays explained.
A Ban Lacks Feasibility
Bitcoin developer Jimmy Song said he did not know the odds of the U.S. government making bitcoin illegal in the same way gold was dealt with, although he did say such an event is possible. “How feasible it is for the U.S. government to enforce this, especially outside its borders is very questionable,” Song told me in a May 18 email. A source of knowledge on the subject, Song authored the book Programming Bitcoin.
As bitcoin continues gaining more of the mainstream spotlight, only time will tell how governments will handle the asset.
Note: This article has been updated, adding the words “with gold” to the headline.
Disclaimer: I actively trade cryptocurrencies, as well as hold a small amount of BTC, ETH, LTC, XMR, NEO, ZEC, BEAM, BCH, DASH, LINK, XTZ and various insignificant other altcoin positions.