Soon, the governments of the world will not need to worry about the anonymous properties of Bitcoin so much.
If you think about it, Bitcoin is mostly a PGP Key ring and a replicated accounting ledger. The ledger lets you know how much money you have, the public keys allow you to receive money, the private keys allow you to spend money (digitally sign it off). The most significant point of this is that while carrying your money around, you’ll have the means to digitally sign any electronic message with an intuitive and easy to access medium.
Imagine one day you go to your local government’s motor vehicle department to renew your driver’s license. When it comes time to pay the fees, Bitcoin payment is mandatory. The reason the government wants you to use Bitcoin over their fiat dollars, is so they can associate your public Bitcoin address with your identity.
After you’ve renewed your license and registered your Bitcoin address with the government, you’ll need to pick up some milk at the groceries. Because Bitcoin is more efficient than cash, the grocer will require them as payment. However, it’s now not just a simple scan of a QR code and off you go – the grocer wants to make sure that 0 confirmation transaction will go through. So they present you with a challenge string (or a hash of it) “timestamp customer_id receipt_number amount” and before your transaction can be completed, you’ll need to sigh that challenge with your government registered Bitcoin key as a part of their “know your customer” policy. If there is any problem with the transaction, the store has a digitally signed receipt from you to confirm the transaction and contact information on file to help remediate the problem through email and their web site.
Eventually, merchants will be required to retain digitally signed receipts from customers for items the government would like to track. An this would not be very hard to implement in the lightest of clients. Some issues such as key revocation might have to be addressed, but it doesn’t seem any harder than applying for a new drivers license and registering a new Bitcoin address when it gets lost or compromised.
Additionally, these same Bitcoin keys can be used to create digital signatures for purposes other than financial transactions – Electronic document authenticity and acknowledgement, authentication, and acceptance of terms of service, etc.
These ideas might not result in the best outcome for privacy advocates, but if it is what we must endure for the governments of the world to accept Bitcoin – Personally, I accept it.