> I believe thats because while the US government sees bitcoin as a threat to their currency monopoly, they also see it as more of a threat to other smaller countries with weaker economies. Hence, overall it benefits the USA.

Honestly, I don't think the US government sees Bitcoin as a threat to anything.

Cryptocurrency proponents have often indoctrinated themselves into thinking it is a powerful technology of world-shattering importance ("just give it time!"), but what if that just isn't so? Maybe it's just a cultish sideshow that's occasionally pushed up into fad territory.

> while the US government sees bitcoin as a threat to their currency monopoly, they also see it as more of a threat to other smaller countries with weaker economies

Bitcoin is no threat to the U.S. We have an open capital account. If Congress made Bitcoin legal tender tomorrow virtually nothing would change overnight. (Hell, if Congress abolished the Fed tomorrow and switched to exclusively Bitcoin, we'd just have to dust off old central banking books from the specie days. We'd also enter a deflationary recession.)

For a capital controlled country, on the other hand, cryptos enable currency flight. Hence the lockdowns in China, Russia and India.

Ascribing a single actor and single motivation to "US government" is a common mistake (usually made by non-Americans). It misses the multi-polar nature of the US political and lobbying/advocacy system, and the fact that US policy is usually emergent. The reason there hasn't been a crackdown is that Bitcoin is traceable and intermediaries serving US citizens are abiding by Know Your Customer banking rules.

China already started cracking down on cryptocurrency. Wealthy Chinese had been using crypto mining to evade currency controls and get their wealth out of the country. That still happens now but to a lesser extent.

How is it a threat if it's pegged to the dollar?

They were talking about non-pegged cryptocurrencies such as BTC.

This is on point! BTC in general is a threat to bad government. Maybe we will see days when governments are way weaker than today, much more effective, and citizens willingly, voluntarily and happily pay taxes a la ancient Greece.

I believe the current US Gov strategy is to get entities submitting under their control to work in controlling bigger and bigger stakes of BTC. If they outright ban it before it is the case, they will create a scenario where people withdraw their BTC to private holding instead of using exchanges. The only way USGov comes out unscathed is if the exchanges are under its control and they control most of the BTC in the world.

However, I think even this scenario is not ideal for them, as BTC outside the system will be worth differently than the one inside USGov. The question will be which one will be worth more, and the bigger the diffference, the more the other BTC will flow in that direction