We took a deep dive into the morals and ethics of Bitcoin in the previous talk, showing that it isn’t, in fact, evil — so now we’re going to look at some of the challenges and potential risks to Bitcoin.
One of the most common objections you might hear is that the government will eventually just ban Bitcoin, or seize it, or at least tax it into oblivion. So is Bitcoin really vulnerable to the government? The answer is yes — but the results of government interference may surprise you.
Can the government ban it?
Governments around the world have attempted to ban Bitcoin, but not governments everywhere all at once. China famously banned Bitcoin mining in 2021, and that didn’t kill Bitcoin. The net effect was that the epicenter of global hash-rate shifted to the United States, where mining was still legal.
As we enter the era of nation-state adoption, many theorize there will be a global hash-war — countries competing to provide the most hash-rate, or raw power, to the Bitcoin mining network in order to reap the most benefits from the protocol and accumulate the most Bitcoin. If this comes true, China’s decision could prove to be one of the costliest blunders in modern warfare.
It’s true that the price of Bitcoin took a hit after the Chinese mining ban, but many other factors probably contributed to that price action — not the least of which were scandals like FTX, and the four-year halving cycle, which is the predefined reduction in Bitcoin supply issuance from mining. The point is, the ban didn’t kill Bitcoin, and in hindsight the price hit was just a temporary setback in the context of the new all-time highs of late 2024.
While it’s theoretically possible that Bitcoin could be banned everywhere all at once, this is about as likely as the internet or power grid going down across the globe and staying that way indefinitely. And even if governments were able to coordinate such an attack, it’s unlikely that 100% of citizens in every country would choose to comply. On non-compliance in the Bible, think of Gideon in Judges 6, who beat out wheat in secret to hide it from the Midianites, or the Hebrew midwives in Exodus 1, who refused to comply with Pharaoh’s order to kill all the male children.
The fact is, Bitcoin is a decentralized protocol, and copies of the blockchain are hosted by ordinary people in every country. This makes it effectively impossible to ban, as every single person running a node would have to be found out and shut down simultaneously. The governments of the world are powerful, but they’re not omnipotent nor omnipresent. And with many nation-states announcing plans to launch strategic Bitcoin reserves — including the United States — this objection gets even more far-fetched as time goes on.
What about seizure?
Honestly, governments do have a history of seizing Bitcoin — and other assets like gold, for that matter. This is what Bitcoiners call a 6102 attack, a reference to FDR’s executive order in 1933 and the Emergency Banking Relief Act, which forced Americans to relinquish their gold under penalty of law.
Given this precedent, it is appropriate to fear government seizure of Bitcoin, and this is why fighting to keep Bitcoin decentralized and in self-custody is so important. With many people now buying Bitcoin through ETFs — most of which currently use Coinbase to actually custody the Bitcoin — there is a credible threat that the US government could seize a sizable amount of Bitcoin from Coinbase.
Of course, this type of seizure isn’t a threat to Bitcoin in general, but rather just to people who don’t practice self-custody. And if the US did decide to take such action, it would probably be to maintain power and wealth, not to destroy Bitcoin — because, unlike other cryptocurrencies that use proof of stake, holding more Bitcoin doesn’t give you any more or less control over the network. We’ll discuss this in more detail shortly.
Will they tax it into oblivion?
The final flavor of this objection — the idea that governments will tax or regulate Bitcoin into oblivion — has some validity, as even now in early 2025 Bitcoin doesn’t receive the most equitable tax treatment in many developed countries. The United States, for example, taxes Bitcoin like property, which means any buying, selling, or even transacting falls under capital gains tax law.
If you’re buying and holding — or HODLing — this doesn’t present much of an issue. But if you want to use Bitcoin transactionally on a daily basis, it creates an onerous and often impossible level of accounting to track all the potential gains and losses to report at the end of the year for capital gains taxes.
It’s possible governments could go further and institute policies like unrealized capital gains taxes, but it’s also becoming more and more likely that Bitcoin will instead be treated as any other currency. That would pave the way for using it as a medium of exchange, as onerous capital gains accounting would no longer apply. Only time will tell what the future holds, and there are plenty of countries that already treat Bitcoin favorably — even as legal tender. In a future where Bitcoin is the global reserve currency, countries will have to compete for productive citizens just like they compete for hash-rate and owning Bitcoin directly.
For more details on the risk of governments banning Bitcoin, read chapter 26 in Broken Money by Lyn Alden and chapter 11 in Gradually, Then Suddenly by Parker Lewis.
Does Bitcoin undermine the government’s authority?
So if Bitcoin isn’t vulnerable to the government, does that mean it undermines the government’s authority to coin money? Article 1, Section 8 of the Constitution of the United States gives the government the right to coin money, regulate the value thereof, and fix the standard of weights and measures.
The answer is no. The government maintains the power to declare what is legal tender — in other words, what can be used to pay debts both public and private, and to pay taxes. In the case of the United States, this is of course the US dollar, and Bitcoin cannot and does not have control over this. The US government has already classified Bitcoin as property, at least from a tax standpoint, which means it’s legal to own and trade.
Again, this is specific to the United States at the time of this recording, and your mileage may vary if you live elsewhere. So please be careful to understand and obey all the local laws and regulations in your jurisdiction, and of course, be sure to pay your taxes in the currency that your government requires. If Bitcoin can help you do this, great!
But what about the idea that Bitcoin weakens fiat currencies, which thereby weakens the governments that issue them, which in turn undermines their power and authority? The argument is that, even though Bitcoin doesn’t claim to be legal tender, many have already accepted it as money, and when they sell their fiat currencies to buy it, those currencies suffer while Bitcoin continues to appreciate. Granted, this is the situation for most, if not all, fiat currencies — but I would argue that this is actually victim-blaming.
The reality is that it’s governments that voluntarily choose to debase their currencies by maintaining reckless fiscal and monetary policies, such as endless deficit spending fueled by bond purchases from central banks that create the money out of thin air. Then, to add fuel to the fire, governments license banks that participate in unethical practices such as fractional reserve banking, where banks loan out demand deposits. Contractually, bank customers have the right to demand repayment of such deposits at any time without warning, and this has led to countless insolvencies and bank runs — which then cause the government to print even more money to bail out the banks.
All of this activity increases the money supply, which is the true cause of the inflation that ultimately motivates people to sell fiat for Bitcoin. Yes, this selling does put further downward pressure on fiat currencies, but the same argument can be made for any asset class that people monetize as an inflation hedge, such as real estate, gold, or art. To paraphrase Ludwig von Mises, inflation is not a random or spontaneous event, but rather the consequence of a deliberate policy — and the end result is the loss of purchasing power, which is effectively the same as theft. Even if this is a government policy, that doesn’t make it just. The Bible expects us to be prudent and wise with our wealth, and using inflation hedges, Bitcoin or otherwise, is a natural and sad consequence of the fiat system in which we live.
For more details on inflation, and how the financial system and fiat currencies actually work, read chapters 14 and 15 in Broken Money.
Can Bitcoin be lost or stolen?
So what about more personal risks — can’t Bitcoin be easily lost or stolen? The media loves to publicize stories about early adopters who threw away hard drives with thousands of Bitcoin and now spend their days combing through heaps of trash in landfills. Some estimates even claim that over a million Bitcoin have been lost forever. It’s undeniable that Bitcoin has been lost, but the question really boils down to this: is it any easier or harder to lose Bitcoin relative to other bearer assets, such as gold?
In the most basic case, holding Bitcoin means writing down 12 words, or stamping those words into a fireproof metal plate that can be stored in a safe or safety deposit box, just like gold coins. If you go the metal-plate route, it’s actually nearly impossible to destroy the information without melting it down, so in reality the custody situation is very similar to that of gold or any other monetary metal.
Most of the famous cases of lost Bitcoin come down to the bearer not really understanding the value — or, more likely, the potential future value — of the asset, and so they were careless with it, or literally forgot about it and threw it away. At this point, with Bitcoin trading around $100k, I think everyone is well aware of the value, and there are plenty of custodial and self-custodial solutions that make losing Bitcoin extremely unlikely.
Theft is actually a far bigger threat. If you take self-custody of your Bitcoin, you may be susceptible to a $5 wrench attack — the idea that someone can threaten to kill you with a $5 wrench if you don’t hand over your 12 words. Even this is still very unlikely, but there are rare examples of it happening, so as the price of Bitcoin goes up, and if people know you may have Bitcoin, it’s prudent to take steps to defend against this threat.
If you’re into self-custody, one of the best ways to handle this is using a multi-sig wallet, which just means it requires more than one key, or set of words, to send your Bitcoin. We’ll discuss different custody options in a later video, but for now it’s enough to know that there are options, and there are plenty of companies that can help you think through and even do collaborative custody for you.
In the end, Bitcoin is still part of this world, and we still need to heed Jesus’ warning from Matthew 6:19–21:
Do not lay up for yourselves treasures on earth, where moth and rust destroy and where thieves break in and steal, but lay up for yourselves treasures in heaven, where neither moth nor rust destroys and where thieves do not break in and steal. For where your treasure is, there your heart will be also.
Matthew 6:19–21
Is Bitcoin just too complicated to understand?
So even if you agree with everything up to this point, you may still be thinking: Bitcoin is just too complicated — how can I invest in something I don’t understand? After all, this is exactly how Warren Buffett feels, one of the most successful investors of the last 50 years. Buffett famously said that he only invests in companies he thoroughly researches and understands.
Given his success rate, it’s understandable that many follow his advice almost religiously, but in the case of Bitcoin, few have actually spent the time to research it. Most people assume that researching Bitcoin will prove fruitless because they’re non-technical or don’t have a degree in computer science or economics. It’s true that understanding every line of Bitcoin’s code is probably out of reach for most people, but like any complex system, there are many layers and levels of abstraction that are accessible, regardless of your background or intelligence level. And you don’t really have to understand all these complexities to use Bitcoin — but that’s not really the objection here. Let me explain.
Take our banking system and fiat currency in the United States. Few people actually understand how banks function, or where dollars come from, or what the Federal Reserve is, but that doesn’t stop anyone from using dollars and banks. We’ve grown up in this system, and it seems familiar and convenient, and most of the time it just works. If you’ve actually tried to research these topics, you know just how convoluted and complicated the system really is — and by comparison, Bitcoin almost seems too simple, not from a technical standpoint, but more so from an economics perspective.
I think the real objection here stems from the fact that most people place an incredible amount of implicit trust in the current system while holding Bitcoin to a different standard. Bitcoin is relatively new, and it does take time for people to trust new systems, but it’s also overtly technical because of popular labels such as “cryptocurrency,” which lead people to believe they must understand esoteric concepts like cryptography in order to understand Bitcoin. What you may not realize is that cryptography also underpins the security of the banking system — and really all of our modern communication and financial systems. Again, lack of understanding about how these systems work doesn’t stop anyone from using them, because it’s all based on trust.
Furthermore, I believe the original question incorrectly frames this entire conversation by categorizing Bitcoin as an investment as opposed to an alternate monetary system. We agree that you should try to understand any investment you make, and that you should build trust in any monetary system you choose to participate in — but these are two very different things that shouldn’t be conflated. Bitcoin isn’t a company that has a CEO, a balance sheet, or cashflows, and trying to research and understand it by these metrics is nonsensical. Instead, start with the assumption that Bitcoin is digital money that promotes human freedom, and compare it in like-kind to other types of money and markets that you are more familiar with.
And don’t sell yourself short. You don’t need a computer science degree to understand and use Bitcoin, or even take self-custody — but you also don’t have to start at self-custody either. We’re in a golden age of high-quality content on Bitcoin, and we’ve done much of the heavy lifting for you by bookmarking some of the best books, videos, and podcasts we’ve encountered over the years. They’re all available in our resource library, which links to resources at almost every layer of abstraction. We’re confident that anyone can understand Bitcoin at a meaningful enough level to develop the trust and conviction to participate.
I’ll mention a few of our favorite resources now. If you’re into books and want to start with a non-technical overview of both the fiat system and Bitcoin, read Broken Money or The Bitcoin Standard by Saifedean Ammous. If you prefer shorter-form content, check out Matthew Kratter’s YouTube channel, Bitcoin University. And if you’re really looking for a good technical primer, start with 3Blue1Brown’s video But how does Bitcoin actually work?
So if Bitcoin isn’t an investment, what is it? We’ll talk about that in the next part.