Banning Bitcoin

19 Pages Posted: 14 Oct 2016 Last revised: 22 Sep 2020

See all articles by Joshua R. Hendrickson

Joshua R. Hendrickson

University of Mississippi

William J. Luther

Florida Atlantic University; American Institute for Economic Research

Date Written: June 15, 2017


We employ a monetary model with endogenous search and random consumption preferences to consider the extent to which governments can ban bitcoin. We define a ban as a policy whereby government agents refuse to accept bitcoin and mete out punishments to private agents caught using it. After identifying monetary equilibria where bitcoin is accepted, we then derive the conditions under which a ban might deter the use of bitcoin. As in earlier studies, we show that a government of sufficient size can prevent bitcoin from circulating without relying on punishments. We also show that, given its size, a government can ban bitcoin so long as it is willing and able to mete out sufficiently severe punishments.

Keywords: Ban, Bitcoin, Cryptocurrency, Currency, Endogenous matching, Money, Money matching, Political economy, Random matching, Transactions policy

JEL Classification: C78, E41, E42, E50

Suggested Citation

Hendrickson, Joshua R. and Luther, William J., Banning Bitcoin (June 15, 2017). AIER Sound Money Project Working Paper No. 2020-07, Available at SSRN: or

Joshua R. Hendrickson (Contact Author)

University of Mississippi ( email )

Oxford, MS 38677
United States

William J. Luther

Florida Atlantic University ( email )

777 Glades Road
Boca Raton, FL 33431
United States


American Institute for Economic Research ( email )

PO Box 1000
Great Barrington, MA 01230
United States


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