The most popular way governments currently attempt to regulate Bitcoin is through exchanges, liquidity providers and other intermediaries. By complying with know your customer (KYC) and anti-money laundering (AML) regulations, these new banks are able to offer compelling prices and attract the most inexperienced users. This has important consequences for the fungibility of the bitcoin supply and probably constitutes one of the greatest threats to Bitcoin’s promise of individual self-sovereignty.

It is not clear if, when and how governments will introduce central bank digital currencies (CBDCs) into their economies, but just like a government could promote the use of its CBDC through economic incentives, it could disincentivize bitcoin payments.