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Stepping into the Battleground: World Government and Cryptocurrency

by ImmuneBytes
Stepping into the Battleground: World Government and Cryptocurrency

Ever since the introduction of the world’s first cryptocurrency, Bitcoin (BTC), hit the world in 2008, it has generated headlines and controversies. It has always been a hot topic among governments and authorities regarding whether or not to legalize cryptocurrency, or more like: how do we control these?

Gone are those days when people weren?t aware of crypto. For the past year or two, they?ve spread like wildfire. And as cryptocurrencies spread across the globe, so do the regulations to govern them. The crypto landscape is constantly evolving and keeping up to date with the rules in different global territories isn?t easy. 

But the bigger question that stands is: Can the government regulate cryptocurrency?

In this blog, we discuss cryptocurrency regulations worldwide, should or shouldn?t crypto be regulated, and much more. Let?s first get started with why the government is so cautious when it comes to crypto.

Government Wary Of Bitcoin: Yes or No?

Some might say that governments around the world are eyeing Bitcoin?s advance warily. However, some, like El Salvador, have adopted it as currency. But major economies, including the United States, are still far from recognizing it as legal tender. And they might even have some good reasons for doing so. 

In order to understand why governments are circumspect about Bitcoin, we must first understand the importance of fiat currencies in a country?s economy. Fiat money is backed by the full faith and credit of a government, meaning the government’s promise to make the borrower of a currency whole, in case of a default. 

Okay, but What Did Bitcoin Do, You Ask?

Bitcoin?s decentralized system has the potential to dismantle this age-old system. The Bitcoin network or for that matter, any cryptocurrency in general, does away with intermediaries and, by extension, the elements of a government?s system. 

A ?central bank? is no longer required because Bitcoin, the currency, can be produced by anyone as long as they?re running a full node. The chain of trust underpinning the current financial infrastructure seizes to become an algorithmic construct in Bitcoin?s network. A transaction is not included in the central ledger unless it is approved by all full nodes. Even a single disagreement or error in a transaction entry can result in its rejection. 

And That Is Exactly Why Some May Say That the Government Is Wary of Cryptocurrencies.

Ray Dalio, the billionaire founder of the world’s largest hedge fund, Bridgewater Associates, has warned that the boycott of Bitcoin on a global level is a possibility. Dalio said governments around the world could collectively outlaw Bitcoin, which is an unregulated and decentralized digital asset. Why? Because in his opinion Bitcoin could become a threatening alternate currency that could challenge the authorities of central banks around the world.

?In history, they’ve outlawed gold and they’ve outlawed silver, and so on, and they could outlaw Bitcoin. Every government wants a monopoly in their own currency,? a report quoted Dalio as saying.

All said and done, the bigger question now is can cryptocurrencies be regulated?

Can The Government Regulate Cryptocurrency?

History is filled with wild things that were supposed to be free, but eventually got regulated by governments. Talk about the Internet, it was supposed to diminish government control, as no single power can destroy it. Yet, every government has the power today to regulate it. So is the case with social media. Crypto prophets suspect the day will come for cryptos too, sooner or later.

The topic of digital currencies and regulations is a complicated one. Cryptocurrencies, by their nature, are freewheeling and not bound by country borders or government agencies. However, this admirable nature introduces a predicament to policymakers who are accustomed to handling straightforward definitions for assets.

The unstoppable rise of this new form of finance has been halted whenever a government brings up its policies, with each country taking a different approach to crypto regulation. Some are handling it well and others, not so much. If you remember 2021?s dramatic market slump due to China?s hardline stance to shut down exchanges in their native country and escort miners out through land-use regulations, you?d know what we?re talking about.

The main issue with regulating Bitcoin and other alternatives is that they?re conducted over a P2P network. While governments have been successful in regulating venues, such as The Pirate Bay and Silk Road, there are countless cryptocurrencies. The main difference is the transactions conducted over exchanges or through direct transactions using your cryptocurrency wallet. 

Yet, this doesn?t mean the government is completely helpless against cryptocurrency regulations, or are they? 

Governments ?Crack Down? on Cryptos?

Without a thought, the number one way that the government could regulate cryptocurrencies is by taxing any fiat money you use to cash out a virtual token, which we already see happening in some countries.

Take a look at crypto regulations around the world:

Crypto Regulation all around the world

Most cryptocurrency trading in the U.S. takes place in a legal gray area, a point highlighted by the nation?s two top market watchdogs in testimony to Congress in February. Still, the Securities and Exchange Commission (SEC) has been scrutinizing everything from ICOs to cryptocurrency hedge funds and trading venues. 

In India, cryptocurrency has been a subdued topic up until last year. From an outright ban on cryptocurrencies in 2016 to an upcoming Bill for regulation?the government?s stance on digital assets has changed considerably over the past few years. However, the authorities have time and again expressed their opposition against cryptocurrencies, saying they pose a serious threat to any financial system since they are unregulated by central banks.

Canada has been fairly proactive in its treatment of cryptocurrencies, primarily regulating them under provincial securities laws, where cryptocurrencies are not legal tender but can be used to buy goods and services online or in stores that accept them. 

Japan currently has the world?s most progressive regulatory climate for cryptocurrencies and recognizes Bitcoin and other digital currencies as legal property under the Payment Services Act (PSA). Singapore and Australia also consider cryptocurrency exchanges and trading legal and have taken a much friendlier stand on the issue. 

Cryptocurrencies are broadly considered legal across the European Union, but cryptocurrency exchange regulations are different in individual member states. 

With so many governments being on either side of the extremes, let?s weigh our options.

Decentralized Cryptocurrency: A Safe Investment or Wildfire?

The Cons

Let us first look at the potential reasons why cryptocurrencies might not work:

  • Volatility is the biggest reason that works against cryptos. Volatility in the market affects a token?s ability to serve as a medium of exchange.
  • High speculation and artificial pricing continue to persist. And there are always cyber security risks.
  • Let?s be honest, cryptos aren?t scalable. Yet. Many cryptocurrencies still face scalability issues despite the advancements made.
  • The supply chain crisis. Many blockchain networks struggle to keep up with demand.
  • And of course, there are environmental issues that are a struggle to get rid of completely.

Now let?s weigh down the brighter side.

The Pros

  • The eradication of third parties. Some might argue otherwise but trust us, it?s not.
  • Transactions can?t be reversed or counterfeited.
  • Most currencies have a set supply, which will cool inflation as mining more currency becomes harder.
  • Lesser transaction fees than credit cards or most major financial instruments.
  • The increased competition allows for greater consumer choice.

Unquestionably, the current monetary system is flawed. But Bitcoin and cryptocurrencies are not necessarily the silver bullet we?re looking for, at least yet!

Impact on Cryptocurrencies After Government Regulations

If Bitcoin and other currencies were to be regulated completely by the government, it could affect them in a handful of ways. 

First and foremost, governments can regulate the price of assets, like fiat currencies, through purchasing and selling activities in international markets. Second, they can compress extreme enthusiasm for an asset class by attaching regulations to it. Specifically, ones that boost the cost of conducting business. Lastly, governments can make the asset rare by forcing certain controls on it. Take the case of gold as an example of this method. This precious metal has import restrictions in various countries. Each of these actions has the capacity to fail regarding Bitcoin and cryptocurrencies.

The Bottom Line

Bitcoin has become a touchstone for controversies ever since it was introduced to the world in the aftermath of the financial crisis. Governments have become wary, even fearful, of Bitcoin, and have alternated between criticizing the cryptocurrency and investigating its use for their ends. 

And while it may look like it can dismantle the existing financial system, the cryptocurrency system is in itself, very deeply plagued. Frome volatility to money laundering and cyber crimes and frauds, how could it possibly handle a national economy? Yet.

Never say never. The advancements in this field are unbeatable and it would come as no shock to the world if one day Bitcoin and cryptocurrencies stood as powerful as to replace the traditional financial system. We are surely waiting for the day, are you?

About Us 

ImmuneBytes is a Cybersecurity security company that employs the industry’s best tools and practices to provide a comprehensive smart contract audit. We have a team of robust and experienced security professionals who are adept at their niches and provide you with quality service. We have worked on 175+ projects spread across the world on different Blockchain frameworks with some of the industry’s top firms and we continue to unfold the decentralized movement.

We are also providing consultancy, coming up with a bug bounty platform, and also an insurance product to provide our clients with a hassle-free security product catalog. Stay tuned.

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