> Counter argument: politicians (and the 1%) need to protect against inflation/taxations, so they may not all be in favor, and will leak the plan. It will cause a huge Streisand effect, as "there is no such thing as negative publicity": random Joes will buy crypto, making the plan politically undefensible.
Uh, what? This makes zero sense. There is absolutely such a thing as negative publicity, especially if major governments threaten to effectively wipe out the value of Bitcoin.
You could just as easily see a large fraction of the holders of Bitcoin try to cash out, to put into more safe investments while the situation stabilizes. This will probably create a crash, as Bitcoin is so prone to. More people will cash out. This will probably increase support for regulating or banning crypto exchanges. Some will already have cashed out, they're happy. Some of the ones that haven't will direct their anger against Bitcoin and support regulations. Some of the ones still holding will try to fight it, but they'll be in the minority. Most people who never invested will probably support bans ("I don't want to risk unwittingly getting hit by a crash like that in the future"). You'll probably have lots of emotional stories about grandpa losing all his savings in the media. I mean, we've seen this story over and over before in the stock markets. Someone figures out "get-rich-quick" schemes, they crash, people demand regulation. What makes anyone think that it'll be any different with cryptocurrencies once they become big enough?
I think it'd be absolutely reasonable to require exchanges to guarantee that there's X% of reserves behind any cryptocurrency it trades. That'll probably kill Bitcoin, since you'd probably want to build such a requirement into the implementation of the currency. And it'll probably put a big damper on the growth of the conforming cryptocurrencies.