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.
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.
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.
Cryptocurrency fanatics think that they can digitally outcompete physical reality. They cannot. The governments of the world are the Borg - you will be assimilated.
I am a person with nuanced thoughts and opinions, unique and diverse from the rest of the world.
>cryptocurrency
Let's not confuse zk proofs with cryptocurrency. Powerful, non-cryptocurrency systems that use zk proofs are coming. Alone their power is something we must reconcile, even before combined with distributed, autonomous systems.
And that's my point. ZK proofs are astoundingly powerful. Our societies and governments should be getting ready to deal with them.
>protect itself through regulation
Yes, this is a tool of the state. But it's just that, a tool. People have tools too.
The assertion of absolute state control is contrary to the state loosing the Crypto Wars (https://en.wikipedia.org/wiki/Crypto_Wars). The Crypto Wars were one of the first examples establishing the limits of state power in the face of the Internet. This is before other global projects like BitTorrent or Gnutella.
The world is wide and I suspect the future is going to be weird.
It only has to go as far as the person you are sending it to, and it's journey is finished, and it's value is realised. Crypto is entirely different in that it has no value unless you can sell it on to another person. That final step is it's weak point.
That's my point. You can ignore economics entirely and zk proofs are still going to radically transform our societies and IT systems, long before considering their impact to the cryptocurrency industry.
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.
It's just like governments trying to ban torrenting and p2p file sharing. Look at how well THAT went.
> 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.
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).
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.
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.
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).
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?
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.
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.
That's... A big deal?
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.
At that point, you cannot move your money around however you like, you can only move the tokens around on the blockchain.
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.
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.
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.
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.
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.
How would that work? Can't you just not donate the house, after they have given you their crypto?
A ban would force the wallet's company to stop allowing its use on crypto exchanges.
- 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.
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.
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.
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.