If Bitcoin is not controlled by the state, how come in some countries it is illegal?

Question

From my understanding, Bitcoin is decentralized and not controlled by any company or organization (so, for example, no bank is behind Bitcoin).

However, this seems to not be powerful enough to resist to the country laws.

There are quite a few countries where Bitcoin is illegal, for example, Bangladesh:

In September 2014, Bangladesh Bank said that "anybody caught using the virtual currency could be jailed under the country's strict anti-money laundering laws"

So, why is the fact that Bitcoin is not controlled by governments/organizations/banks/etc so important, if the government can actually say don't use Bitcoin and it becomes illegal?

As one who has bitcoins, what should I do if my country will Bitcoin one day?

Answer 1

A party can send a hexadecimal string to another party and nobody in the world can prove bitcoin or any form of money was sent. Governments can ban bitcoin usage but the bitcoin protocol is indistinguishable and can be implemented using plain speech, so it would be a matter of banning freedom of speech.

Answer 2

Well this is a vague question. To answer your query from the county's government context: Any form of payments that surpasses their way of handling the payments will surely attract some potential threat of being called as an Illegal asset for the citizens of that country.

The use case of Bitcoins have started and grown in such aspects that no one is so sure and so unsure for and when they are being used. Thin line difference between "declared as Illegal" and "stop using Bitcoin" statutory warnings.

When Illegal : Keep it as a converted currency in fiat format(USD,CAD,INR etc) or some other Non illegal declared cryptocurrency being used on the Internet.

When just a warning/public announcement : Keep watch on the National news and continue minimalized form of trading .

Answer 3

This is where you run into the difference between legality and ethics. In this case, the government is making a rule that it cannot technically enforce. So, the question then becomes an ethical one if the legal enforcement mechanism is broken.

Governments have both ethically legitimate and ethically illegitimate reasons to want to control Bitcoin. For example, I think we can all agree that if a judge issues a search warrant in connection with a crime, and the judge has not been corrupted or bribed, then the authorities have a right to seek evidence( including finances such as Bitcoin). That is part of the social contract and ethically legitimate.

If, however, the government sets up an NSA dragnet spying program without the public's knowledge or consent, that is ethically ilillegitimate. It is not part of the social contract and can as such be circumvented ethically.

Either way, the government cannot control the use of Bitcoin, due to encryption. By using Bitcoin over a VPN based in a separate nation, or via TOR, the government cannot tell who is using Bitcoin, and anonymity is preserved (as long as you do not exchange goods for Bitcoin in a traceable way!).

So, if you want to use Bitcoin, you can do so regardless of the legality if proper precautions are taken. The question becomes, instead, should you? Is your use of Bitcoin ethical? Is buying drugs off of the Silk Road ethical? That's a debatable question. Is circumventing capital controls, such as China's, an ethical move? Again, debatable. Also, the government may not be able to stop you from using Bitcoin, but they can set up false listings in Silk Road to try to catch criminals at the delivery point.

Let's take Trump's threat to ban remittances out of the US. Trump can shut down all Western Unions with the flick of a pen. That's easy because Trump can enforce this. However, Trump cannot ban Bitcoins because there is no way to enforce it. Without shutting down the entire Internet there is no recourse, and even then smuggled paper wallets could be used.

The question is not can you, but should you? Also, do you feel any loyalty to the nation on which you reside? Many do not anymore, but if you do this could influence your decision to uphold laws that cannot be enforced.