Russia’s nascent crackdown on Bitcoin is misguided, in my view, but it reinforces a point that some supporters of virtual currencies tend to underestimate: governments can ban them if they choose.
That sounds like an obvious point, but some libertarian enthusiasts for Bitcoin talk as if it can challenge fiat currencies without governments and central banks being able to stop it. John McAfee, the anti-virus entrepreneur, is one of them:
“Things like Bitcoin are completely outside the control and the knowledge of anyone. It will be everywhere and the world will have to readjust. World governments will have to readjust.”
That is half-true at best. People may exchange Bitcoins or other cryptographic currencies out of the public eye, but governments can easily crack down on exchanges through which they are turned into other currencies.
China has already taken measures to stop online exchanges taking RMB deposits for Bitcoin and Russia could follow. The reality is that virtual currencies need some official imprimatur if they are to be widely adopted, as opposed to being a minority craze.
As I wrote last week, it would be a shame if the benefits of the Bitcoin technology were lost because of overblown claims about its uses as a rival to fiat currencies. It seems to me that the true potential is as a means of exchange.
The US is leading the way in trying to devise a sensible framework for virtual currencies. Meanwhile, if Bitcoin’s advocates do not tone down their wilder bursts of enthusiasm, they will provoke governments into proving them wrong.