It Wouldn’t Be So Easy to Ban Bitcoin

A ban, which has been suggested by Sen. Joe Manchin, could follow several possible courses. Each of them would pose major challenges.

National Journal
Add to Briefcase
Catherine Hollander
Feb. 27, 2014, midnight

Could you make bit­coin il­leg­al in the United States? Sen. Joe Manchin, D-W.Va., wants to, his of­fice said in a state­ment Wed­nes­day. The state­ment ac­com­pan­ied a let­ter from the sen­at­or to six bank­ing reg­u­lat­ors call­ing for them to “take ap­pro­pri­ate ac­tion to lim­it the abil­it­ies of this highly un­stable cur­rency.”

That could mean a lot of things. Manchin asked fed­er­al bank­ing reg­u­lat­ors to ban the di­git­al cur­rency, but if they de­cline to do so (and they’ve giv­en no signs of mov­ing in that dir­ec­tion at the mo­ment), his wish could re­quire an act of Con­gress. It’s not yet clear that Wash­ing­ton’s ap­par­ent em­brace of the de­cent­ral­ized, com­puter-based cur­rency this fall will weak­en in light of the news that a well-known ex­change col­lapsed this week, with users’ money be­lieved to be miss­ing. Sen. Tom Carp­er, D-Del., who chairs the Sen­ate Home­land Se­cur­ity and Gov­ern­ment­al Af­fairs Com­mit­tee, said in a Tues­day state­ment that the news from the Ja­pan-based Mt. Gox ex­change was “un­ac­cept­able” and pledged to work with rel­ev­ant gov­ern­ment agen­cies to make sure noth­ing like that happened in the United States.

As reg­u­lat­ors and law­makers con­tin­ue to con­sider how bit­coin fits in­to the coun­try’s eco­nom­ic eco­sys­tem, there aren’t any signs of mo­mentum for le­gis­la­tion to clamp down on the vir­tu­al cur­rency, which was in­tro­duced by a mys­ter­i­ous pro­gram­mer or pro­gram­mers un­der the name of Satoshi Na­kamoto in 2009 and is “mined” by com­puters that solve com­plex equa­tions. But if Manchin were able to rally the sup­port of his col­leagues for his ban, he could pur­sue a few dif­fer­ent courses of ac­tion.

Law­makers could crim­in­al­ize the crypto­cur­rency, like marijuana, and make it il­leg­al to pos­sess or sell bit­coin. The down­side to that strategy might be the cost of en­force­ment. “It would seem to me that en­for­cing or hav­ing bit­coin be il­leg­al would be an un­wieldy pro­cess,” said Bar­rie Van­Brackle, a part­ner at Man­att, Phelps & Phil­lips who prac­tices in the pay­ments trans­ac­tion busi­ness.

The gov­ern­ment could also ban busi­nesses from ac­cept­ing bit­coin in ex­change for goods and ser­vices. Right now, the Na­tion­al Bas­ket­ball As­so­ci­ation’s Sac­ra­mento Kings and on­line dis­count re­tail­er Over­stock.com are among the high-pro­file busi­nesses that say they will ac­cept the di­git­al cur­rency. Law­makers or reg­u­lat­ors could block banks’ abil­ity to trans­act in bit­coin, as well.

“I don’t think it would very ef­fect­ive,” Ju­dith Rinear­son, a part­ner at Bry­an Cave who has worked with bit­coin com­pan­ies, said of bans and crim­in­al­iz­a­tion. “I think it would just drive it un­der­ground any­way, which would not be in any­one’s in­terest.”

Reg­u­lat­ors or law­makers could try a de­terrent ap­proach in­stead of an out­right ban by, say, telling busi­nesses that if they used bit­coin, they would be sub­ject to a man­dat­ory and auto­mat­ic audit. Fail­ure to reg­u­late bit­coin might also de­ter some wary users from pick­ing up the di­git­al cur­rency, if they knew they wouldn’t have re­course if a U.S.-based ex­change failed, for ex­ample.

For now, state reg­u­lat­ors have been largely mum on their next steps, ex­cept New York, whose su­per­in­tend­ent of fin­an­cial ser­vices said was con­sid­er­ing a spe­cially tailored li­cense for bit­coin firms with­in its bor­ders. So have fed­er­al reg­u­lat­ors. The Treas­ury De­part­ment’s Fin­an­cial Crimes En­force­ment Net­work, which has been the most vo­cal, is­su­ing guid­ance on the vir­tu­al cur­rency, had no com­ment on the Mt. Gox is­sues on Wed­nes­day. Manchin wants them to come out force­fully against bit­coin; there’s just no sign of that — yet.
×
×

Welcome to National Journal!

You are currently accessing National Journal from IP access. Please login to access this feature. If you have any questions, please contact your Dedicated Advisor.

Login