> Oh I'd be all for getting rid of KYC laws and similar, no complaints here.
I'm not entirely sure why we still have them. They're expensive and inconvenient, studies have shown that they're extraordinarily ineffective, as far as I can tell they persist because people have the perception that they're important and then resist getting rid of them.
> Personally if I were buying prescription meds I'd go to a pharmacy simply because I don't went to be caught and charged with illegally buying a controlled substance.
Aspirin isn't a controlled substance. In theory someone who didn't have to comply with regulations could supply it for a lower price. But the drug store's price isn't particularly excessive and risking your life on your distant acquaintance's chemistry skills generally isn't worth saving $0.50.
If the price difference was much higher or the pharmacy wasn't allowed to sell it to you at all then many people would do exactly that, as we've seen.
> The laws are enforceable if they catch you. Catching you will be harder on the black market, but you absolutely can be charged if they do.
You have to consider how catching you generally happens.
Suppose you have a law requiring merchants to offer a 30 day warranty. This is easy to enforce -- the customer goes to have the merchant honor the warranty and if they don't the customer reports them to the government.
Now suppose the law prohibits certain types of transactions, even if neither party is deceiving the other and both are entering into the transaction with informed consent and of their own free will. Well then they're just going to do it and not tell anybody about it, and how is anybody going to find out?
The government can try to enforce laws like that. But their ability to depends on the perpetrator's willingness to do business with strangers who are really undercover law enforcement. In general the higher level operators avoid doing that and the low level pawns are disposable and arresting them doesn't make a dent.
Trying to do that with digital currency is possibly the hardest of any of them because by its nature it's fungible and can be transferred across the internet. If someone set up a foreign site where anyone could exchange cryptocurrency for bullion or some other commodity, what does KYC enforcement look like? The party intended to be doing it would be outside the jurisdiction and the most visible artifact would be a package with some non-contraband fungible commodity going through the mail.
> Fewer potential customers to transact with means demand goes down, in all likelihood the value of bitcoin would be much lower if there were no legal uses for it.
The premise isn't that there are no legal uses, it's that the legal uses would have to do KYC. So the people not breaking any laws would do the KYC and the people breaking laws would not.
Also, the value of Bitcoin only really matters to people holding non-trivial amounts of it or making contracts denominated in it, i.e. speculators. It makes little difference to anyone using nominal amounts as a currency.