Governments are yet to show their interest in Cryptocurrencies. And there are clear reasons for this. Major Cryptocurrency have spread their roots in different countries. Most of these currencies have fixed monetary routes, and the transactions are anonymous. Hence, it becomes hard to track them.
If the adoption grows, it will impact the current financial system greatly. Having no infrastructure for controlled Cryptocurrency regulation, central banks and governments think they will lose their monetary control over the nations.
The fear of lack of control includes the following.
- Capital Controls.
- Money supply.
- Interest Rates.
- Law enforcement on Anti-Money Laundering.
- Financial investigations.
To understand the fear, it is important that you take your time to know what the government thinks about Cryptocurrencies.
Why Nations Perceive Bitcoin To Be A Threat To Their Sovereignty?
Fiat is a term that has been issued to the conventional form of currencies. And we value these currencies because we know that the top institutions are backing their value. But today, this value means nothing, as people become more financially literate and have realized that fiat currencies are not backed by any physical, tangible asset.
For instance, you can not return the currency back to the nation in return for gold or any physical liabilities. The fiat currencies are fully backed by the faith people hold in the government and central banks. The Government doesn’t want to lose this power to control the financial flow in the market.
Why Control Matters?
The government controls the flow of the traditional fiat currency. With the central banking sectors’ help, they use the fiat currency to support the nation’s economy. If the government wants, they can vaporize the whole currency concept into thin air.
Government’s power to dictate fiat currencies can be understood in the following.
- Money Transfer.
- Tracking Currency Movement.
- Dictating Who Makes The Profit In The Movement.
- Collecting Taxes.
- Tracking Down Monetary Fraudulent Activities.
Once the government accepts Cryptocurrencies regulation, all these powers that they enjoy will be lost in a flash.
Control over the currency has several downstream impacts. Perhaps, fiscal policy ranks at the top. Then there are the business environment and fraudulent monetary activities.
The fiscal policies on currency transfer are important for the nation’s economy. The fiscal policy of the nation depended on the current economy. If the government sees that the economy is unstable, they change the fiscal policies to boost trading activities and stimulate the market to create new jobs.
Then there is a threat of inflation or recession. Governments take full control of the financial flow and stimulate the market to stop the nation’s crumbling economy.
As we know that to use fiat currencies, one needs to have a bank account. However, with Bitcoin and other Cryptocurrencies, you don’t need one. Cryptocurrency is created in cyberspace and uses miners to validate every data and transactions. In return, miners are rewarded with the same form of cyber currencies.
If Cryptocurrencies enter the market, the government will lose control over the financial flow. Not only that, as these transactions do not need any bank accounts, the government will not be able to track illegal transactions. You can know all about the Crypto transaction at https://trustpedia.io/.
Untraceable currencies always bring in criminal activities. Over the past decade, several money laundering cases and criminal cases have made people skeptical about the Crypto market. Name any crime, and you will find that every crime is related to untraceable currency in one way or another.
Although fiat currency shares the same fate, we have several cases that prove fiat currencies are also prone to scams and money laundering cases. Hence, the government is afraid that adapting to Cryptocurrencies will only boost criminal activities.
These are just a few reasons why the government is being skeptical about Cryptocurrency adoption. However, after the second successful rally in November 2020, many nations have accepted Cryptocurrency’s importance and how its adoption can significantly boost nations’ economies.
Today, most countries are experimenting with the CBDCs and hoping to launch central bank-backed Cryptocurrencies in the market soon.