R Street Institute

Analysis

Governments could take bitcoin out of circulation

by Alex J. Pollock
May 22, 2018
Print
issues: Federal Government Affairs, Finance and Trade, Financial History, FinTech
originally published in Financial Times
Nima Tabatabai asks about bitcoin, “can financial regulators control this emerging digital monetary asset?” ( Letters, May 18). The answer is they can. If a government sets its mind on it, it can tax, punish and regulate any monetary asset out of circulation. In the 1860s, Congress put a 10 percent tax on state bank notes to prevent their competing with the new U.S. national bank notes. State banks survived by expanding deposits, but state bank notes as a currency were gone. In the 1930s, the U.S. government, formerly on the gold standard itself, made it illegal for its citizens to own gold or denominate payments in it. Violating the prohibition was made a crime punishable by a fine of $10,000 or 10 years in prison. In the 1960s, the U.S. government simply refused to honor its explicit promise to redeem paper silver certificates with the silver dollars which were certified as “payable to the bearer on demand.” Thus U.S. dollar bills convertible to silver ceased to exist as a currency.

What might governments do to bitcoin or its holders or users? That depends on how threatened by it they feel.

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