Could the RESTRICT Act ban Bitcoin in the US?

Cryptocurrencies, and Bitcoin (BTC) in particular, have been central to a number of debates and discussions around the world. As the digital currency’s popularity and value continue to grow, so do concerns about its implications for financial systems and national security.

With governments trying to regulate this new form of currency, some have even considered banning it altogether. In the United States, a central question arises. Could the RESTRICT Act be used to ban Bitcoin?

What is the RESTRICT Act?

The RESTRICT (Restricting Entrance for Strong Tactics to Repel Illicit Conduct and Terror) Act is a proposed piece of legislation before the US Senate. The purpose is to combat money laundering, the financing of terrorism and other illegal activities.

It focuses on identifying and punishing individuals and entities engaged in such crimes. The bill aims to strengthen the country’s financial system by preventing abuse of its institutions.

The RESTRICT Act also seeks to impose tighter rules on financial institutions, strengthen the authority of law enforcement agencies, and facilitate international cooperation to combat illicit financial activity. It proposes to create new criminal offenses and impose tougher penalties for those involved in money laundering and terrorist financing.

Bitcoin and Crypto in America

Bitcoin and other cryptocurrencies have gained real traction in America. Many companies and individuals embrace them as a means of payment, investment and store of value. In fact, a recent report revealed that 67% of millennials in America see Bitcoin as a safe haven.

The country has become a hub for crypto innovation, boasting a number of startups, exchanges and blockchain technology companies.

While the US government has not banned cryptocurrencies, it has taken a cautious approach to their regulation. Federal and state agencies have issued guidelines and rules to govern cryptocurrency-related activities, such as trading, mining, and initial coin offerings (ICOs).

Additionally, the Internal Revenue Service (IRS) treats Bitcoin as property for tax purposes, while the Commodity Futures Trading Commission (CFTC) considers it a commodity.

Can the RESTRICT Act be applied to Bitcoin?

The RESTRICT Act focuses primarily on preventing and combating illegal financial activities.

If lawmakers were to claim that BTC facilitates such activities and poses a serious risk to national security, they could potentially use the law as a basis to ban Bitcoin. However, this will require a strong case showing that Bitcoin is inherently linked to criminal activities and cannot be adequately regulated.

Even if the RESTRICT Act was used to ban Bitcoin, implementing such a ban would be monumental. Given the decentralized nature of BTC, enforcing a ban would be difficult, as transactions occur on a peer-to-peer basis, with no central authority to control or monitor them.

In addition, the use of virtual private networks (VPNs) and other privacy-enhancing tools can make tracking and identifying users challenging.

A ban on Bitcoin could lead to a thriving black market, similar to what has happened in countries that have tried to ban cryptocurrencies. This will ultimately undermine the purpose of the RESTRICT Act, and fuel more illegal activities.

Implications of a ban

Banning Bitcoin could have far-reaching economic consequences. The burgeoning cryptocurrency industry has attracted investment, created jobs and spurred technological innovation.

A ban is likely to result in the loss of these investments and stifle the industry’s growth. Furthermore, it may push companies and individuals to move their business to more crypto-friendly jurisdictions, as the crypto exchanges Gemini and Coinbase have decided to do. This can lead to brain drain and loss of tax revenue.

Coinbase CEO Brian Armstrong mean in the need for regulatory clarity for centralized actors. He argues that blockchain technology can promote consumer protection, national security and economic growth. Still, he says, the Securities and Exchange Commission (SEC) has caused “incalculable harm to America with its policy of regulation by enforcement.”

Furthermore, the threat or reality of a ban on Bitcoin may also hinder the development and adoption of blockchain technology. This can affect various sectors, from finance and supply chain management to healthcare and voting systems.

Michael Sonnenshein, CEO of Grayscale Investments, claims that regulators are making it difficult for entrepreneurs to understand the difference between a cryptocurrency and a commodity. Yet regulation is not a “one-size-fits-all answer.” According to Sonnenshein, regulatory clarity is an “existential” necessity for the growth of the blockchain industry in America.

For all these reasons, the United States risks falling behind in the global race to harness the transformative power of blockchain technology. And a ban on Bitcoin could cripple the cryptocurrency industry.

The loss of such a significant market could create uncertainty and volatility. That could lead to reduced investor confidence and lower cryptocurrency prices.

Alternatives to bans

Instead of banning Bitcoin outright, lawmakers may consider implementing stricter rules. A robust regulatory framework can address concerns related to money laundering, terrorist financing and other illegal activities.

Also, it could include enhanced know-your-customer and anti-money laundering requirements and stricter oversight of crypto exchanges and other businesses involved in the industry.

Another option to address concerns surrounding Bitcoin could be to develop and issue a government-backed digital currency. This will allow the government to maintain control over the crypto market while taking advantage of the benefits of blockchain technology.

The need for clear rules

The RESTRICT Act could potentially be used to ban Bitcoin in America. But doing so is likely to result in a number of challenges and unintended consequences.

Instead, it may be prudent for lawmakers to consider alternatives, such as stricter regulations. The United States must balance the need to protect its financial system and national security with the benefits of blockchain technology.