yall's faith in the willingness, or even desire of the federal government to follow the constitution is pretty misplaced imo, but if it really wants to, there are numerous ways the federal government can crack down on bitcoin usage. they can hide behind the patriot act relatively easily, they can try to classify it as an alternative currency (which are legal here, but there are dozens of regulations - it's transactions have to be taxable, each note has to have a recorded serial number, etc, virtually all of which bitcoin is in violation of), but more to the point, I think the media and the government could either, each by themselves, or working together turn public opinion against bitcoin so easily and so fast that it really doesn't matter what legal route they use. I mean, if you just shove down americans throats that bitcoin is being used to finance hard drugs, child pornography rings, child prostitution, human trafficking, and sex trafficking, what the frick opposition from the american people do you really think you'll get? americans have zero use for bitcoin - the original primary motivations for it's development, opposition to gov't monopolistic power over currency value, actually end up being completely undermined by it's design. I dont have time to explain all the details, but basically it's developers had no understanding of how foreign exchange markets function and why. Their nice neat planned gradual deflation, simply by virtue of curtailing supply growth, will not go according to plan as it's valuation will be violently unstable for the foreseeable future, for numerous reasons. the short version: for one, there are zero negative feedback loops in this market; if anything there are numerous positive feedback loops, and two, the primary stabilization force of normal floating currencies, speculators trying to take advantage of arbitrage opportunities, will likely never to be able to function for bitcoin - in the short run because there's just not enough liquidity and too much uncertainty to make it profitable, and in the long run because of the lack of available information on the currency, by it's design, which prevents speculators from ever being able to accurately price it.
So bitcoin's supposed use as a store of value, specifically one preferable to the dollar because of it's predictable deflation, is actually complete nonsense - it is inherently dangerous to store large amounts of money in a currency so unstable. so it's only legitimate long term use is as an intermediary for currency exchange, so sorry to disappoint, but it is simply laughable to think it will ever "undermine" the us dollar, the fed, ecb, or any other developed currency. Not to say it won't have a significant effect, because what I think it WILL do, is end up severely undermining long term efforts of developing countries, specifically colombia, china, and iran from successfully imposing capital controls, which will have massive economic implications in it's own right.
but back to americans, since they will have no use for it as a more stable store of value relative to the dollar, or need for it to engage in currency exchange, I little cause whatsoever for virtually any chunk of the population to be opposed to attempts to ban it's usage here, much less a majority. And the arguments for it's protection will come off as just incredibly weak to americans, and rightfully so imo. trying to classify it as "speech". to call that a stretch would be putting it lightly - you cannot pay for sex with a child with "speech". Trying to defend it as a "right" to privacy? you have a REASONABLE right to privacy. If you to claim that you deserve a right to privacy to the extent that you can commit some of the most heinous crimes we have laws against in a way in which the gov't is unable to prosecute you for it, even the most hardcore originalists on the supreme court will politely tell you to go frick yourself. bottom line - if americans simply dont care much what the government has to do to figure out how to stop these people, then there are numerous options the gov can pursue to bend the rules a little to make it easier to find these people. and because people likely wont care, they'll be able to pursue more invasive, less constitutional, but faster and cheaper strategies, and the amount of time and resources needed will be substantially lower than otherwise. As soon as solutions are found, odds are they'll try to force joint legislation passage both here and in the EU, and literally as soon as people with bitcoins become aware of that, you will see a panicked mass selloff and a deflationary death spiral towards zero. It will bounce back almost immediately though as soon as the dust settles and people realize it's going to be awhile until they actually start prosecuting people, and in the meantime oh look practically free bitcoins. plus the demand of users in developing countries will remain, but i would guess that that would be a fairly paltry fraction of total bitcoin economic activity.
Basically, the very thing that fueled it's entire growth up to this point - anonymity - will also be the attribute that prevents it from ever being accepted by the public, and thus being legal. Large companies like amazon will likely never accept them due to it's negative social stigma, i mean imagine if they did. the media is constantly desperate for a new crusade against big business, and one of the biggest ones decides to start accepting money that for all they know could have just been directly generated from child prostitution or human trafficking, just so they can try to maximize profits. The media would have a fricking field day, and amazon would be crucified so bad, jesus would wince. Again, the US gov would not have to "end" bitcoin or "stop" the deepweb. Their only realistic objective would be to stop US participation.
an alternative outcome could be that IF a successful crackdown is made, then perhaps it's developers could find some middle ground in terms of transparency that would make it more palatable to the public, and perhaps regulated as an alternative currency. But if that happens, there is no way they would regulate it, or rather not regulate it, in a manner that would allow it to undermine domestic monetary policy. If a ton of things go right, in the very distant future i could realistically see it becoming something similar to(or at least an easier way to think of it) a sort of internationally accepted, digitally transacted, precious metal.
In the end, i think the most likely scenario is that this ends up springing up very quickly due solely to it's novelty and people's general lack of understanding of it's actual potential, but getting smacked back down again almost as quickly. People end up learning from it, and then move towards a better alternative in the future.
just my two cents.
and yeah i know, way TL;DR, but i didnt want to have to post this crap again every time someone starts a bitcoin thread because they think a bunch of computer programmers found a way to undermine every central bank in the world.