Why Are Governments Wary Of Bitcoin?
Introduced in 2008, Bitcoin has since produced its fair share of controversy and news. Amongst this, there has been widespread adoption of Bitcoin, amongst other cryptocurrencies, which has, in turn, brought with it a whole host of complexities and challenges.
One such challenge is the relationship between global governments and cryptocurrencies, in particular, Bitcoin, with complex and ever-evolving issues. Although some countries have embraced the integration of Bitcoin, others have been more cautious about the intricacies involved. With that in mind, let’s take a look at some of the reasons why governments are wary of Bitcoin.
Bitcoin Can’t Be Regulated
In order to understand why governments are cautious about the introduction of Bitcoin, it’s best to understand why the role of Bitcoin can play a huge role in the country’s economy. Fiat currencies, which are conventional currencies used by governments, are typically backed by the government. In the US, the government also relies heavily on the Federal Reserve, which is a central bank that Congress only has partial control over to manage the circulation of money.
Bitcoin is unregulated, meaning that governments can’t control it. The US has taken a varied approach to the regulation of cryptocurrency and some individuals in Congress have voiced that they would like to see a new framework put in place that allows the industry to thrive. But, there are ongoing concerns that Bitcoin and other cryptocurrencies bring issues such as trading scams, fraud, money laundering and other types of cybercrime.
Currently, there are no prohibitions in place that prevent banks from offering crypto services, but the Federal Deposit Insurance Corp. (FDIC), the Federal Reserve and the Office of the Comptroller of the Currency (OCC) have released a statement that highlights the risks that cryptocurrencies can bring to banks, stating that “issuing or holding as principal crypto-assets that are issued, stored or transferred on an open, public or decentralised network is highly likely to be inconsistent with safe and sound banking practices”.
Bitcoin Is Used In Illegal Activities
With its ability to divert past regulated financial infrastructure, Bitcoin makes it easy for criminals to use the currency for illegal purposes and activities. With Bitcoin, users are only identifiable by their address on the network – no names or details are shared – making it easy for criminals to go unnoticed.
It’s not easy to trace transactions or the identity of those making a transaction on Bitcoin and, as well as this, the algorithm on Bitcoin gets rid of the need for trusted contacts to be required at each end of a transaction like with traditional banks. Therefore, it isn’t surprising that Bitcoin is preferred by criminals when conducting illegal transactions.
Is Bitcoin Legal Currency In Any Country?
Bitcoin is classified as a legal currency in some select countries, but it can be used anonymously to carry out transactions between any two account holders across the globe. As a result, this has raised some concerns for governments. Although there are some legislators who don’t support … Read More..