Bitcoin is a digital currency that can be transferred from one account to another without a middleman’s need. That means a user can send bitcoins without the help of any central bank, financial institution, or government body. As a result, many people have accepted it as a viable financial system.
Some emerging economies with most developed countries declared bitcoin is legal. However, there are still many countries like Bolivia, Alegria, and Vietnam that have banned the usage of bitcoin.
Surprisingly, China, one of the fastest-growing economies, has also banned bitcoin and cryptocurrencies. In this article, we will look into these matters that why the government does not like bitcoin.
Why the Government Does Not Like Bitcoin
Some countries ban bitcoin with the fear that it can be used for criminal purposes and some fraudulent activities. At the same time, some economies fear that it can be a threat to their control. Now let’s explore the five major reasons why some governments do not like bitcoin.
–Loss of Control Due to Decentralization
–Fiscal Treatment is Complex
–A Threat to the Business of Central Banks
–The Concept of Bitcoin is Still Young
Loss of Control Due to Decentralization
Governments have the power to control traditional currencies such as Dollars, Euros, Yuan, etc. They can change the monetary policy to run the economy. They can track the movement of money in the economy, which earns profits and collects tax accordingly.
They can also track criminal or fraudulent activities performed with the fiat currencies easily. Control over the currency gives the government power to influence the economy, create a monetary policy, foster financial transactions, etc.
With the inception of bitcoin, the government loses control over the currency system due to decentralization. As bitcoin’s underlying technology does not allow any central authority for any transaction, the government cannot regulate the monetary policy and loses its power. Thus, some economies do not like bitcoin.
Due to decentralization and anonymity, more and more criminals are using bitcoin as a viable method for illegal activities. Cybercriminals are using this bitcoin platform to steal money from the users. Many drug mafias are using the bitcoin network to trade drugs and harmful chemicals. More seriously, terrorist organizations are also involved in bitcoin transactions for trading weapons.
These are one of the biggest crime concerns for which many governments fear legalizing bitcoin and other cryptocurrencies.
Fiscal Treatment is Complex
While crime concerns are one of the most potential reasons for which governments do not legalize bitcoin. Another major reason is the fiscal treatment is quite complicated.
As bitcoin operates through blockchain technology, a decentralized network, the government finds it hard to plan the monetary policy and tax regulations. Tax treatment is one of the major concerns in monetary policy.
A Threat to the Business of Central Banks
The government controls the country’s finance and economy with the help of central banks and financial institutions. After Bitcoin has become the mainstream, many central banks have lost their business, which is eventually a loss to the government. Thus, the government, as well as central banks, do not like bitcoin.
The Concept of Bitcoin is Still Young
Last but not least, the concept of bitcoin is still young. The value of bitcoin is not also stable, and it is hard to use a currency that has not a stable value. That’s why some countries are also waiting for a few more years to accept bitcoin as a viable financial system. Many people still do not trust the concept of bitcoin. Time can only say whether bitcoin will be used as a global currency or not.
Nobody knows whether the world will completely accept bitcoin. But the growing number of people in the bitcoin space shows that it can disrupt the present financial system in the future. Anyway, if you have never used bitcoin, consider using it for buying goods or services; you can also trade bitcoin to earn profits. Finally, please leave your comments below and ask your queries.
This article was edited and published by Rick Weinberg, California Business Journal’s Founder and Editor-in-Chief. Click here for Rick Weinberg’s biography.