I’m not sure how the difference of treatment between “cleaned” and “dirty” #Bitcoin by financial institutions will end up playing out but the worst case scenario would be a different exchange rate and market for each category. Unless Bitcoin moves to proof-of-stake I don’t think that the censorship of P2P transactions of “dirty” bitcoins is likely. Having two markets/exchange rates would already be a quite destructive consequence. https://casten.house.gov/imo/media/doc/blockchain_integrity_act.pdf
Discussion
I admire Bitcoiners who still haven't given up its potential use as money despite all the risks involved. Non-fungibility means plenty of different exchange rates. The same could happen to cash vs. KYC-fiat.
Monero fixes this, but it would need a boost in mainstream awareness now.
But maybe it is best for it going underground for a couple of years.
The challenge for #Monero is going to be the accessibility to the masses. It would be a shame to end up as an underground tool. But with #KYC on the base layer #Bitcoin is in the same position (there won’t be any freedom to transact for KYC bitcoins).
proof of stake doesn't have less censorship resistance than proof of work. both styles are observed to have the same degree of vulnerability to OFAC compliance (some), and the same mitigation (wait longer). if you want maximum censorship resistance, it doesn't matter if there is proof of work or proof of stake. you need to take away the ability for block producers to discriminate the transactions in the mempool by making them all look the same.