BTC (Bitcoin) finally enters its teenage years having spent the last decade on front page news as its price broke to the capitalization of trillion dollars and the crypto space prevails to increase with each passing day despite such volatility. Since 2013, various big banks and government bodies have released statements against crypto and also gone far to ban them. But governments failing against crypto have always remained the same. The wide adoption of crypto among its users have always made it a winner.
A Connection To The Banking System
As governments aim at regulating BTC, global banks have been at the cutting edge to spread misinformation on digital currency and sow doubt into the minds of the users. Since the early inception of crypto, executives at the biggest banks of Wall Street fretted on the concept of regulating crypto, asserting it would legitimize them, and threaten the finance sector as a whole.
Back in 2013, Jamie Dimon, then CEO of JP Morgan Chase, the biggest U.S. bank, termed Bitcoin a “terrible” store of value, Christine Lagarde, the European Central Bank President has bashed cryptos as a means for terrorism financing and illicit trades, and H. Rodgin Cohen, the pre-eminent lawyer of the finance industry, warned the regulators of state that the federal government was “very worried” about BTC and its use. Even many governments have planned for the government owned cryptocurrency known as CBDC (Central Bank Digital Currency) that can be regulated by the central bank of that country.
Governments Failing Against Crypto: Why Are They Worried?
Whether the state and regulation-less future planned by crypto evangelists comes to pass is still an open question. In the meantime, governments across the globe are trying to evaluate the effect that the digital currency might have on their economies in the near-term. Prominently, they are adopting the following three issues presented by BTC in its present form. Despite the governments failing against crypto, what issues about this industry worry them the most?
1. Crypto Can Evade Government-Imposed Capital Controls
Governments at times institute capital control to stop outflow of a currency as this can debase the value of the currency. For some, this is another type of control exerted by the governments on fiscal and government policies. In such scenarios, the stateless nature of BTC arrives in handy of evading capital control and export of wealth.
Another renowned scenario of capital flight using BTC took place in China. Citizens of the country have an annual limit of $50,000 to buy foreign currency. A report by one of the most famous crypto forensic firms, Chainalysis, found that over $50 billion shifted from Bitcoin wallets that were based in China to foreign wallets. This implied that the citizens of China have converted their local currency to BTC and have transferred it across borders to avoid government regulations. This is how governments failing against crypto.
2. Crypto Ties To Illegal Activity
The potential to bypass the prevailing financial framework for a nation is considered as a blessing in disguise for criminals as it allows them to camouflage their association in such activities. The network of Bitcoin is pseudonymous, implying users are recognized only by their addresses on the network. It is hard to trace the provenance of a transaction or the recognition of an individual or organization located behind the address. Along with this, the algorithmic trust engendered by the network of Bitcoin that obviates the requirement for trusted contacts at either end of an illegal transaction. There have been many such breaches and the governments failing against crypto security.
3. Crypto Is Unregulated
More than after a decade of Bitcoin’s inception, governments across the globe are still figuring out ways to regulate digital currencies. Several banks against cryptocurrency have issued statements for regulating. There are various strands of BTC’s regulation issues. For instance, altering narrative related to BTC utility has complicated questions associated with the appropriate governing bodies to oversee the digital currency, definitions to be availed for lawmaking or, even the approach for the creation of laws. This is one of the biggest problems with cryptocurrency.
The Bottom Line
Crypto has become a touchstone for controversy since it was introduced to the world in the aftermath of the financial crunch. Governments have become cautious, even fearful, of crypto, and have alternated among criticizing digital currency and investigating its usage for their ends. While it has the ability to decentralize and alter the operations of the prevailing financial infrastructure, the ecosystem of digital currency is still rife with criminals and their scandals. But still the governments failing against crypto and in the above article, we have stated why. Now you may wonder can government stop bitcoin, the answer is it is difficult. Bitcoin has received a good popularity over time, so stopping it completely is a difficult task.