How the US Gov’t can Shut Out Crypto

In the 1820s, how did the US Treasury and the Second Bank of the United States (SBUS), the rough equivalent of the Fed, deal with all the independent currencies of the time? Basically, they refused to deal with them.

The SBUS made it policy not to accept or deal in the notes of any other bank. (The SBUS issued its own notes like the Fed does.) And, the US Treasury made it a policy not to accept any banknote denominated at less than $5. It just so happens that the smallest denomination issued by the SBUS was $5. So, while not banning all the independent banknotes, the US gov't made SBUS notes largely the only ones that could be used in national, official business, making all the other notes regional ones.

What's the lesson for crypto here?

It would be easy for the US Gov't to say that any business with it must be conducted in the Fed's CBDC. If your business is largely conducted in a private crypto, you will have to convert it before paying your taxes, the same for individuals. This conversion would cost money and get expensive. So, people may just decide to avoid private cryptos and just deal in US CBDC, relegating private currencies to certain sectors of the economy. The exchange fees may also drive the private cryptos to a discount.

Such an approach, along with regulation, could give crypto a hard time.