I think it's inevitable. Even if it largely unenforceable, I believe the US will ban the use of bitcoins as a currency.
The effects of this:
- Current bitcoin-to-cash and cash-to-bitcoin services will be shut down. No one could continue to operate a decently large service like that and not be caught.
- A black market might form for bitcoin-to-cash and cash-to-bitcoin services, which specializes in avoiding the government's watchful eye. I am not sure how they would be able to do it, but I would bet it would involve piles of laundered drug money that is currently invisible to the government.
- Bitcoin value would drop like a rock overnight. Without anyone being able to exchange bitcoins for USD, many investors/speculators would lose confidence and try to sell sell sell as quickly as possible to avoid being stuck with bitcoins they cannot use (read: cannot continue investing with). Investors/speculators don't want to buy stuff with bitcoins, they are only in it for what they can get out of it in USD.
- Many people would still see the value of bitcoins as a currency, and would not join in the panic sell - they would hold on to their bitcoins and wait to see what happens.
- Pricing of goods and services in bitcoins would suddenly become extremely arbitrary, with no USD exchange rate to compare prices to.
- Eventually, bitcoins would see stability again, albeit at a much lower market value. Trades of bitcoins for goods and services would start happening again at a regular rate. Pricing for goods would still be semi-arbitrary for quite a while, with fluctuations depending on the seller's belief/trust in bitcoins. Lower trust in bitcoins = higher price for goods. Buyers would be mostly willing to accept whatever the current lowest price is for the good or service they are looking for.
- The cost to mine bitcoins within a certain period of time may come in to play with regards to the ending "stable" market value of bitcoins, and thus, the saleprice of many goods and services.
Discuss.
