I’m a Bitcoin optimist. Henry Farrell isn’t. In an astute post, he argues that the big threat to Bitcoin’s long-term viability comes from government regulation. Governments are used to being able to control how the financial system works, and the Bitcoin network’s decentralized structure threatens that control. So, Farrell argues, if Bitcoin ever really takes off, regulators will try to destroy it.

This is a smart argument. Indeed, I believed it a couple of years ago. The problem is that it’s a couple of years out of date. If regulators were going to try to shut down the Bitcoin network, they needed to do it in 2012 or 2013, not 2015.

In early 2013, Bitcoin was best known as the payment system used by the drug marketplace Silk Road. It wouldn’t have been surprising if federal officials had taken a hostile stance toward the system. But a savvy lobbying campaign from Bitcoin supporters convinced the feds that the smart play was to make peace with Bitcoin rather than to fight it.

Advocates’ argument was simple: Bitcoin was so decentralized and globalized that it would be impossible to drive it out of existence. Even if it was suppressed in the US, the network would continue operating overseas. Americans could use anonymizing technologies like Tor to access it. But if US officials tried to stamp it out, they’d destroy legitimate Bitcoin businesses and with them any influence over how the Bitcoin economy evolved. In particular, they’d lose the ability to subpoena the records of Bitcoin companies to help them trace Bitcoin transactions.

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