Crypto craze has been sweeping the whole world for a decade now. Will crypto find favor with the governments across the globe? The answer to the question is most difficult one yet is the most sought for.
What is Cryptocurrency?
Cryptocurrency is the latest fixation amongst the investing masses today. Unlike other currencies in use currently, cryptocurrency is a peer to peer digital exchange of money. Money can change the ownership without the interference of any monetary system or bank. It is decentralized system of transferring money which makes it highly secure as well. In simple terms we can call it as digital money.
Along with this, crypto trading comes with a great deal of advantages. With advanced blockchain technology, the money can change its ownership in fractions of seconds. And the transaction fee for the whole process is negligible in comparison to the transfers via banking system.
In this read, we are trying to analyze the various points which may be the concerns of the governments all over the world.
No Control Over Financial Transactions
But then what is keeping the governments at bay from accepting cryptocurrency in core medium of money exchange. The first major reason for this is that the government will lose control over the financial structure of the nation. If the transactions are only peer to peer, it will be difficult to track the history of trade.
Cryptocurrencies also come with another very important feature, that is, maintaining anonymity. From the records of blockchain, one can easily check ‘how much’ and ‘when’ about a transaction. But it is almost impossible to find out ‘by whom’. This goes against the KYC (Know Your Customer) documentation necessary for any kind of monetary transactions via banks or apps.
Rise In Criminal Activities
Secondly, it is gaining traction in the dark world as the transfer of funds for illegal activities is difficult to trace. The payment for drugs and arms made in cryptocurrency is giving way to rise in criminal activities.
It is also giving birth to fraudulent activities in the name of Bitcoins and quick gains. There are plenty of incidents where people have been duped in the name of some Ponzi schemes of multiplying money within days.
High Speculation
The next important point in the series is the highly volatile nature of the currency. Bitcoin has witnessed many highs and lows in the past few years. The market value per Bitcoin has multiplied manifold from zero to $ 65 million. Though it is trading somewhere about $ 40 million presently. Such erratic valuations cannot lead a nation to a sustainable form. Even a small news item holds the capacity to affect the price of the cryptocurrency in global arena.
Additionally, this kind of financial instability may have adverse effects on the mental health of young investors. It also has a tendency to promote a wrong work culture. The attraction for the youngsters here is quick and easy money. They think it to be a wealth building platform.
Moreover, the governments could not let people lose their hard-earned money to such unpredictable movements of the Crypto World.
Frequent Money laundering activities and Tax evasion
Fourthly, the crypto industry is becoming a massive hub for money laundering activities. All those who earn money from illegal activities have found a new platform to convert it into clean money.
Last but one of the most important from economy point of view is the tax evasion. The past record of trading in cryptocurrency reveals how it is widely used to shake off taxes. People are seeing the cryptocurrency as a potential link to convert black money to white money.
Effects of The Russia – Ukraine Crisis
The Russia- Ukraine war has witnessed a backing of crypto funds in the form of donations. Bitcoin turned out to be a life savior for the war affected people of Ukraine. Therefore, it becomes all the more important to think about the upcoming implications of the same. Governments across the world cannot take hasty decisions regarding accommodation of cryptocurrency in the economy.
What the Governments might choose?
The consensus mechanism on the blockchain is yet to gel with the consensus of the governments. The grey areas of the blockchain technology are yet to be sorted out. Till the time governments do not find a way to intervene in crypto transactions, cryptocurrency won’t find a way into the mainstream system.
The crypto world will go through a number of modification cycles until it comes out with its full potential. Developed countries, such as the US, Canada, Europe and Australia are moving in positive direction to regulate this space. They have yet not banned the trade which implies innovation in crypto field in the times to come.
With certain regulations in the trades related to crypto assets, government might give a legal sanction to them in the near future. For this maybe the governments will come up with their own cryptocurrencies. This may be done along with the KYC of investors under the control of some regulating authority.
This revamping of things will definitely take time. As it will also require the restructuring of associated legalities along with the monetary system. Till the time governments give green signal to the cryptocurrency, NFTs and DeFi, the only thing one can bank upon is the trust accumulated by the banking system.
Disclaimer: The author has not made any monetary investment in any of cryptocurrencies or digital assets as of now, till the date of publishing this article. The views presented here are purely for educational and information purposes. Readers are advised to consult with their financial advisor and check legal provisions with regard to trade in cryptocurrencies as per their country jurisdiction. The author or our website shall not be responsible for any kind of loss caused to reader due to forming any decision on the basis of material presented here. Please read the complete Disclaimer here.
