If that we're to happen, the value of BTC would drop through the floor. As it would almost cettainly no longer be possible for any bank linkex exchanges to exist so the currency would cease to exist.
Another crypto currency would take it's place. A commercial one perhaps
Perhaps the solution is to push for transparency instead of for secrecy. Secret transactions don't benefit anybody. Public transactions benefit everybody and increases the long term value and security of the concept of cryptocurrencies.
What about in the case of fraud? Even if the person is pseudo-anonymous it should be possible to track all the transactions made by the pseudo-anonymous person. If a certain Bitcoin address is associated with terrorist activities then perhaps it should be flagged and transactions with that address could be avoided. That in my opinion would be the ideal way of dealing with it, it would be to remove the anonymous nature but maintain the pseudo-anonymous nature.
If a certain address is obviously associated with terrorism then you'd be damn stupid to conduct any transactions with that particular address. I'm fairly certain that the addresses associated with Julian Assange and Snowden are being monitored and that isn't even terrorism. If it were terrorism then they would probably do a combination of social network analysis, counter intelligence operations, and monitoring of certain addresses associated with terrorism. The NSA would almost certainly be involved and if those addresses are associated with IP addresses then those IP addresses would be flagged to.
On top of all that, most of the Bitcoin community would be assisting in tracking and tracing those addresses. Julian Assange and Edward Snowden are mainly political issues and for that reason there is a diversity of responses to these situations, but when you have actual terrorist groups plotting to kill or put innocent people in danger I think the response would be entirely different. There would be a lot less diversity in the opinions and people would gang up on or use mobbing tactics to find the individual. It's very difficult to hide when the entire community is trying to track you down.
Consider also that as Bitcoin becomes more valuable the users in the community will have a lot more to lose. When Bitcoins are worth only $100 each there aren't a lot of people with millions of dollars worth in Bitcoins or hundreds of thousands of dollars worth in Bitcoins. When the price is in the $1000 range this will begin to change. How many people do you think would sacrifice $100,000 or 100,000 euro in Bitcoin savings to have anonymity?
The choice will be a Bitcoin where the price continues to rise and it becomes something mainstream someday, or anonymity which might be useful only to terrorist groups and no one one else which would drive the price way down as people move to other cryptocurrencies which wont be anonymous but which will be worth much more.
What would happen is the people holding $100,000 in Bitcoin would immediately put their Bitcoins into another more transparent cryptocurrency to save their stash. Even people holding a few $1000 would do the same. Bitcoin price would go down from $2000 to $2 probably in a matter of days and the lucky people would be the ones who got out when the news first breaks. Bitcoin would probably never recover from this and while cryptocurrencies would still be used there would never again be anonymity as a feature.
I think people promoting anonymity should be very careful what they are asking for and whether or not it's worth it. Pseudo-anonymity seems to work better than anonymity for honest use.
