The Bitcoin protocol itself cannot be modified unless almost all users collaborate to choose which software to use. It is impractical to try to give a regional authority special powers in the rules of the global Bitcoin network. Any wealthy organization could choose to invest in mining hardware to control half of the computing power of the entire network, thereby enabling the freezing and reversal of recent transactions. However, they have no guarantee of ever having this power, as the investment would need to be equal to the total of all other miners in the world.
However, it is possible to regulate the use of Bitcoin in a similar way to any other currency. Like the US dollar, Bitcoin can be used for a variety of purposes, some of which may or may not be legal under the laws of every jurisdiction. In this regard, Bitcoin is no different than any other tool or resource, subject to different regulations in each country. Under restrictive regulations, the use of Bitcoin would also become difficult, and it would be difficult to determine what percentage of users would continue to use the technology. Governments that choose to ban Bitcoin would hinder the development of domestic enterprises and markets, and shift innovation to other countries. As always, the challenge for regulators is to develop effective solutions without undermining the development of emerging markets and enterprises.
