It s well known mining pools as well as hashing power is centralized in countries where electricity is cheap and using mining farms rather belonging to at least medium sized companies than single hand individuals.
In the same time, it s worth noting most countries have their fincen equivalent linked with other agencies preventing payment processors like banks or visa or paypal from accepting some transactions coming from to or from specific individuals or countries under sanctions like North Korea.
So imagine after a round of negociations, an agreement modifying current Bitcoin s consensus rules for preventing a common set of Bitcoin address (changing dynamically) from spending their money is found. Then the following framework can be set (the number of countries reaching the agreement have to represent more than 50% of the global hash power). This means after regulating fiat exchanges, this is mining which becomes regulated. It might even be done through Interpol.
- Mining pools as well as miners using them are recognized as playing the role of banks (processing transactions) in the traditional system and therefore are not only required to not mine transactions from specific addresses but also to reject blocks directly containing or reffering past blocks containing such transactions. This would be implemented through soft forks. With the existing laws, in many countries this can be done using a decree.
- In order to enforce compliance, a lightweight process is implemented where instead of registering with the related agencies, records of addresses are updated on a website and miners and mining pools need to declare as well as be able to prove which blocks they mined or helped to mine (through mining pools) when filling their tax returns related to mining income.
Of course, that s not to say there s would be a fierce backslash attempt as a result, and that many mining pools would choose to move to safe countries. But ultimately, the rule of markets would apply, and miners having the cheapest cost of mining would choose mining pools complying with the regulations from their countries in order for themselves to comply with their requirements if they don t produce blocks directly.
In order for such scenario to work, the will to stay on a blockchain which was never hard forked would prevail over the will to resist the resulting soft forks much like what happenned with Bitcoin Cash.
Unlike a plain ban where miners don t have any incentive to accept any rules when mining, this would act as a variant of a 51% attack by a state actor which is not only easier to implement but also easier to accept and attract other states at it.
And the longest chain would be the run by complying companies with better access to cash especially for cryptocurrencies using delegated proof of stake. Additionally, if those governments regulated sort forks works (don t accept a transaction after past blocks), any attempts to include such transactions would result in miners stripped from their rewards.
One of the big benefits is this would also apply to things like Dash or Monero on some cases. leaving only cryptocurrencies using ZsNarks (where even the mining pools have no knwolwedge about the address they include in the block they mine but also the potential utxo).
Under those conditions, would such plan work technically?