I thought the whole idea of Bitcoin was to get out of the financial system that Mastercard is a central piece of.
The current world of cryptocurrency gives you a choice of trusting big banks or not, and having the same economic opportunities regardless of the level of trust you are comfortable with.
I've never understood this. With an immutable ledger of all transactions, governments simply have to make it illegal to transact anonymously (or pseudonymously), watch the blockchain, and investigate any un-attributed transactions.
It would actually enhance governments' surveillance capabilities against anyone not willing to run the risk of trying to obscure their identity, which I expect would be most people.
If you can intimidate the participants, the inescapable math of the whole thing becomes a tool that can be used against those participants. You don't need to control a currency if you can control anyone who holds it.
Making something illegal does not give a government control over it. Many websites/apps are illegal in many countries. Yet governments have near zero control over their citizens using those products. VPN.
Bitcoin makes it public record.
Regulating Bitcoin transactions is extremely easy due to the public ledger. You simply make it illegal for exchanges to transact with coins that are known to be stolen or otherwise flagged. Then all exchanges are forced to blacklist coins on that list, as well as descendant transactions from those blacklisted coins.
Now there are two classes of addresses on the blockchain: Those that are clean, and those that are tainted with illegal activity transactions. The tainted coins are worth less than untainted coins as fewer and fewer exchanges will touch them.
Ironically, Bitcoin speculators will support this move because it reduces the supply of Bitcoin. Reducing the supply of Bitcoin increases the relative value of their clean Bitcoin.
In this hypothetical world of regulation which has made some BTC "tainted" through surveillance, it will always be in the BTC receiver's best interest to verify the coins are "clean". Only a fool (or fellow criminal) would transact with tainted coins; most people would probably not use a DEX, or else use one which verified clean coins anyway without being regulated to do so.
Any time a transaction is spotted between a registered and unregistered address, just send a friendly police van to the address on file and seize the registered wallet. Rinse and repeat until unregistered wallets can virtually only transact between each other.
Again, your government banning selling goods for crypto makes it a better investment opportunity for the world.
In this scenario it doesn't matter that you can transfer some coins from a DEX to your "hard wallet". If you haven't registered your hard wallet's address with the government and linked it to your identity, you will be unable to use those coins for anything other than trading with other unverified wallets.
If you want to exchange the coins in your hard wallet for any valuable or material good whatsoever, without disclosing your actual identity to the government, you'd have to find someone willing to do so illegally i.e. a black market.
And the receiver of your "dirty" bitcoin, which is verifiably dirty because the transaction came from your (unverified) wallet, would then have to solve the same problem of laundering the BTC if he wanted to use it to pay for his costs / employees / etc.
And if we're talking about a large economic power, I'm not sure how banning crypto and making its transactions more difficult would help anyone; if anything it would negatively impact that crypto since it is less usable as a medium of exchange.
It may seem outlandish that a government would even go to these lengths, but I'd argue that wielding a centralized currency is too powerful for governments to give it up without a fight.
How? Are you suggesting that every single government in the world would collude together to ban crypto?
What if, at least one of those probably western, countries chooses to make the simple decision of not being a parody of a distopian government?
Then other governments who have chosen to be a storybook parody of distopian would be unable to tell the different between these legally anonymous transactions that are in the normal country that is allowing these transaction, and between illegal transactions that are not in that country.
They couldn't simply watch the blockchain, as 1 country is defecting by not acting like an absurd example of a totalitarian government that is in no way similar to how modern day western countries act.
> You don't need to control a currency if you can control anyone who holds it.
But multiple absurd totalitarian governments that pop up overnight wouldn't be able to control everyone who owns crypto, as there would certain be countries that decide to make the simple decision of not acting like a story book parody of an evil government.
For targeted investigations, blockchain crypto is already being a hugely useful tool for 3 letter agencies. But for dragnet policies of mass de-anonymized transactions, I currently can't think of a way for this to actually work with limited resources.
Currently, anonymization is being defeated at the source by requiring registration with all major crypto exchanges. But once the coins start to circulate like cash, wallet to wallet, you would need to force registration on the wallets (in order to match identity to the addresses) - but there are many options that are either heavily security focused or free and open-source, so it would be difficult to find a single choke point to regulate.
Depends on what the future of crypto wallet adoption looks like, I suppose. Monopolization does tend to happen...
Regulators and other parties will catch up eventually. When there is a 500% tax on homes/cars you purchase with BTC the whole "decentralization/permissionless" idea will fade away.
I think that the question of if we end up being caught without an exit or not comes down to if privacy-preserving technology (on-chain like Monero and/or off-chain like Lightning) gets adopted by businesses and individuals enough for it to be too late to pull back once powers that be have the understanding, capabilities and intention to do so.
2. Different crypto currencies have different roles. If you want to avoid traceability altogether, use zCash.
The number of transactions that needed to be investigated would be a small percentage of the total, and possibly traceable through means other than cracking keys.
2) Regardless of whatever zCash is, my point is that Bitcoin's immutable and complete ledger lends itself to complete surveillance. The math may be uncrackable, but the users are not, and privacy would go out the window if they're forced to transact with registered IDs.
It's prohibitively expensive precisely because being forced to transact with registered IDs is going to be less and less of a requirement moving forward. With DeFi exchanges, we'll see more transactions that stay out of state surveillance.
You're correct that BTC isn't ideal for privacy though. That's why zCash and Monero will also be important currencies.
Japanese exchanges and service providers, for example, are not allowed to touch them.
Blockchain is a public ledger of every Bitcoin transaction ever. It's trivial to track these things. It's trivial to identify downstream coins from upstream illegal activity. Far easier than with traditional currency.
The exchanges will play ball because they want to continue exchanging (making money). The Bitcoin hodlers will play ball because it makes their investment more legitimate and reduces the supply of coins, increasing the value of their stash.
But if you want to get money back out of the system or spend that money on anything, it has to go through an exchange located in your jurisdiction.
Also, watch out for the services that claim to deliver abnormally high interest on crypto investments. There's no free lunch.
One of the key selling points of bitcoin and other cryptocurrencies is removing the middleman from transactions. Arguably miners in the proof of work consensus are a middleman but not as much as the 2.5-3.5% charged by the likes of Visa and Mastercard.
The other one, as OP mentioned, is permissionless or decentralization - the freedom from the whims of governments and traditional banking systems. I don't see how Mastercard can straddle between the two without some deception.
The idea that Bitcoin was going to become a new currency was never true with the low transaction limit and Hugh transaction cost.
This is only possible in our current financial system if you want to take delivery of physical bank notes.