What would happen if the U.S. government banned cryptocurrencies?

If the U.S. government decides to ban cryptocurrencies, this would trigger a series of complex consequences with far-reaching impacts on the cryptocurrency market and the global economy. The government could implement this ban through a variety of means, including restricting crypto trading, cracking down on related technologies, and strengthening supervision. Here are some possible results and impacts:

A comprehensive ban could trigger drastic market fluctuations. Banning cryptocurrencies could cause prices to plummet as a large number of holders would rush to sell their assets. This situation would force the market underground, with trading activities shifting to more secretive channels, reducing transparency and increasing the risk of illegal transactions.

Measures to ban cryptocurrencies could involve attempts to attack the Bitcoin network, such as conducting a 51% attack. Since the two major mining pools control more than 50% of Bitcoin mining computing power, in theory the government could try to integrate computing power to carry out an attack. However, it is almost impossible to actually carry out such an attack because of the huge computing power and coordination required. As early as 2014, Andreas Antonopoulos, author of "Mastering Bitcoin," explained why it is difficult for countries to control Bitcoin.

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Privacy coins such as Monero XMR and zero-knowledge proof coins ZEC have been banned in multiple countries. Regulatory crackdowns could cause these coins to be delisted from centralized exchanges (CEX), resulting in reduced liquidity and lower adoption. Countries such as Japan, South Korea, and the UAE have already banned these privacy coins, and the European Union is considering a similar ban.

China's comprehensive ban (including a ban on crypto trading, mining, and related financial services) is a notable example. In 2021, China declared all crypto trading illegal and banned related activities. Although the ban caused the Bitcoin network's computing power to drop by nearly 50%, computing power quickly recovered as mining moved to other countries. China's ban has hindered the development of cryptocurrencies, but it has also promoted the transformation of the crypto industry.

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Banning self-hosted wallets will seriously affect users' financial sovereignty, making them dependent on third parties who may freeze their accounts. If the government bans self-hosted wallets, users may turn to regions that do not enforce such bans, which may lead to regional fragmentation of the crypto market.

Governments may launch central bank digital currencies (CBDC) as an alternative to controlling the financial system and providing a legal digital currency option. The launch of CBDC will change the way financial transactions are conducted and may weaken the demand for private cryptocurrencies.

In 1933, the US government banned private gold holdings. Despite the implementation of this ban, only 20% to 25% of gold was handed over to the authorities. The ban led to wild fluctuations in the price of gold, and the value of the US dollar against gold fell by more than 40%. The wealth of individuals holding gold increased significantly. This suggests that if the United States and other countries implement cryptocurrency bans, similar market fluctuations and economic effects may occur.