How can an Existing Centralized Finance System Defeat a Crypto-currency?
Premise
(-clears throat-)
I'm imagining a world where financial systems are considerably centralized and the wealthy top few percent hold much sway, so to speak. In this world, it's not inconceivable for money to influence politics or for the special governmental / financial relationships to exhibit rent-seeking behavior.
This kind of institution frustrated some groups of people and some experimenting was carried out. A crypto-currency was developed (at least in part) to decentralize the finance system by taking the central banks out of the equation and allowing users to interact with each other comparatively freely. A limit of the number of the crypto-currency was set, to create scarcity and not allow for rent-seeking behavior or infinite money printing. While this crypto-currency had a modest adoption rate in terms of its user base, it's net-worth has already eclipsed some of the major investment-banks and other inner sanctum constituents of the financial elite. However the value of this crypto-currency is very volatile, ranging wildly, sometimes even from month to month. Still, some think this crypto-currency represents the future of finance, and to an extent the world as a whole. As this world has followed a trajectory of increasing decentralization with the advents of newer technologies. 205
In the past this world had kings and emperors and religious elite, now democratic institutions are gaining momentum (or that's the rumor anyway).
The problem is, the powers that be in the existing financial system would surely not relinquish their grip on the financial system lightly. Maybe they leverage their political clout to ban it outright, or they launch a smear campaign to legitimize it. Or perhaps they could acquire enough stake in it so that they could embrace it. Whatever the existing financial elite do, it would have to benefit them both economically and strategically/politically. The financial system elite are mindful of how fine a line must be walked to avoid creating a "martyr" out of the currency. That is to say, can it be banned outright or would that create its own set of problems (over regulation, control state, suspicion, ect)? That is the crux of it.
To narrow the scope a bit, let's say diplomacy has failed and the two financial systems are at odds with each other. Even if the existing finance elite hold a large stake of the crypto-currency, the intrinsic scarcity of the crypto-currency will make it too challenging for the financial system elite to conduct rent-seeking that they look rather fondly on.
Quesion
What is the best (for the finance system) strategy for the financial system decision makers to defeat the afore-described crypto-currency?
Clarifications
* Setting: Near future
* Success metric: stop the rising adoption of the crypto-currency and keep the it on the fringe or completely non-existant
* Acquiring the crypto-currency is allowed (e.g. acquire and freeze), but it must not be used
* Must imagine you are on the panel of the finance system (what's best for the finance system, might not be best for mankind as a whole, ect)
* Timeframe: The faster the better
* Ethics: little to no concern (don't pull any punches)
* Doomsday scenarios: Ideally, the world would be left in-tact, nuclear war would be avoided and so forth, but if it really, really, truly calls for a doomsday solution, so be it, just explain why 207