Bitcoin is an inherently controversial asset. From its ability to facilitate criminal activity to its overall toll on the environment, these factors have caught the attention of governments across the world.
That is why in this article I will be covering 4 reasons Bitcoin is banned. So without further ado, let’s jump right in.
TL;DR:
Bitcoin is banned in some countries as it can facilitate criminal activity due to its pseudonymity. Transactions are not tied to users’ identities therefore illegitimate activity is easier to conduct. Not to mention, Bitcoin has a high carbon footprint. With countries becoming increasingly energy conscious this is raising concerns. Lastly, it is challenging the government monopoly. Ultimately, the network is not governed by a central authority therefore it circumvents capital control.
4 reasons countries want to ban Bitcoin
1. Criminal activity
There is no denying that criminals play a key role in Bitcoin transactions. After all, it is one of the primary currencies used on the dark web. This was evident when over 140.000 Bitcoin were seized from the black market known as Silk Road back in 2013.
Thanks to Bitcoin’s pseudonymity criminals can transact largely anonymously. Moreover, they can mix transactions with legitimate funds while transferring to multiple wallets as a means to hide their tracks and launder money.
These factors have led to a crackdown by governments. “Criminal activity” was referenced by both Turkey’s central bank and China’s government in their most recent Bitcoin bans.
2. Climate impact
One of the main criticisms of Bitcoin is its environmental impact. All in all, the Bitcoin network relies on energy-intensive computers to validate and secure the network.
To put it into context, a single Bitcoin transaction uses over 2000 Kilowatt Hours worth of energy to complete, this equates to over 40 weeks of energy consumption for the average UK household. Moreover, when compared to Visa’s 148 kWh this is significantly higher.
As a result, energy-conscious countries that are moving to a more sustainable future have started to crack down.
3. Decentralized nature
Bitcoin utilizes a vast network of computers known as nodes. This provides a decentralized network without a central authority governing it. Rather it is secured by a large network of participants who are dispersed globally.
This creates a system that is censorship resistant. As you may have guessed this challenges the status quo of complete government power as they no longer have control of the money supply. Ultimately, it can circumvent capital control and fiscal policy.
All in all, Bitcoin can be accessed by anyone, and transfers are peer-to-peer. Therefore, to counteract Bitcoins’ rising adoption countries have passed legislation to hinder its viability.
4. Extreme volatility
Bitcoin suffers from extreme volatility. Since its inception, it has had an annualized return of over 200% and multiple drops of over 70%. This has caught the eyes of regulators as they deem these price swings as “risky”.
To “protect” investors numerous countries have limited Bitcoin investment products to experienced traders or high-net-worth individuals. In the most extreme cases countries have outright banned it.
Which countries have banned Bitcoin?
The following countries have banned Bitcoin trading. Ultimately, exchanging Bitcoin for goods or services is illegal and individuals face criminal prosecution.
- Algeria
- China
- Turkey
- Bolivia
- Bangladesh
- Macedonia
- Saudi Arabia
- Qatar
- Vanuatu
- Vietnam
- Pakistan
- Afghanistan
Is Bitcoin legal in any country?
Overall, Bitcoin is legal in over 100 counties. In the west, the majority of countries support Bitcoin’s legal status. Notable examples include the United States, European Union, the UK, France, and Germany to name a few.
In the United, States Bitcoin is guided by the Financial Crimes Enforcement Network (FinCEN). Moreover, the treasury has defined it as a legitimate currency that can act as a medium exchange for other FIAT currencies such as the US dollar.
Another country worth mentioning is El Salvador. In June 2021, the country’s government approved Bitcoin’s status as a legal tender. This meant that payees are required to accept it. Moreover, This legislation allows it to be used to trade for goods or services, pay for taxes and debt, etc.
If you want to view this article in a visual format then please check out my video below:
Conclusion
As you can see, there are plenty of countries banning Bitcoin. From China to Turkey the list continues to grow. This is largely due to its energy consumption, decentralized nature, and criminal activity.
If this crackdown on Bitcoin continues is anyone’s guess. I hope you found this article useful and thanks for reading it. Want to learn about 5 reasons Bitcoin is used for illegal purchases? Click here to read my previous article.
