Bitcoin is a form of digital currency that has been around for more than a decade. It gained popularity throughout the world as an alternative payment system with its low transaction fees, anonymity, and the ability to process transactions without the need for a third party. It is a decentralized digital currency meaning it is not controlled by any one government or institution.
With the recent rise in the value of Bitcoin, it’s quite clear that the government is worried about its increasing popularity and value in the market. The government or the central bank has no authority or control over these digital currencies which makes them unable to tax it, regulate it, and control it.
Unlike traditional currencies, which are controlled by the central bank, these digital currencies have proved themselves better and more useful, which is a major concern for the central authorities as the value of their currency diminishes as the value of cryptocurrency rises. This article illustrates why the government is scared of Bitcoin.
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Reasons That Concerns The Government About Bitcoin
1. A lot of money at stake
There’s a lot of money at stake. The value of all bitcoins in circulation has grown up to a huge extent in just a few short years. If you think about it, this could mean that there is more money than ever before in circulation at any given time.
If a large number of people start using bitcoin, then it could cause serious problems for banks and other financial institutions as the value of traditional currencies will fall significantly putting a lot of money at stake. If you are looking forward to knowing more about cryptocurrencies then head on to this platform TRUSTPEDIA.IO/DE/ to read different articles and blogs on digital currencies and stay updated with the market.
2. Used for illegal activities
Bitcoin is an unregulated currency that can be used to purchase goods and services anonymously. The government is scared of cryptocurrency because it can be used for illegal activities such as tax evasion, money laundering, buying drugs and guns online or even funding terrorism. With Bitcoin’s anonymity, there are many opportunities for criminals to use this digital currency for their own gain.
There are no borders or restrictions on how much money you can send to another person or how much you can withdraw from your bank account without being identified as the owner. Furthermore, people who use Bitcoin for purchases may not be reporting income from these transactions on tax forms either which leads to tax evasion.
This makes it very easy for criminals to use Bitcoins for illegal activities without leaving a trail behind them. However, it’s important to remember that the same technology behind the cryptocurrency has been used for good too.
3. Decentralized digital currency
Another reason for the central authorities to be scared of Bitcoin is that it is not controlled by a central authority, bank or financial institution. Bitcoin is a decentralized digital currency, and there is no one person or group of people who can control it.
This makes it very hard for governments to regulate the use of Bitcoin. It could destroy their ability to control their citizens’ financial transactions and spending habits. Furthermore, It could also cause them to lose control over the flow of information about how much money people have in their bank accounts and how much government debt exists in their country’s economy.
4. It doesn’t have real-world value or physical form
The government also worries about the fact that Bitcoin has no real value and is not backed by any tangible assets like gold or silver. Unlike other traditional currencies, Bitcoin doesn’t have any physical form, and is not issued by any central bank or government authority. It is created and stored electronically through a process called mining. This means cryptocurrencies don’t have any intrinsic value and you never know when your currency will be worth nothing.
5. Disrupts the flow of international trades
Bitcoin is a decentralized currency that allows people to transact without having to rely on banks or other institutions like Visa or Mastercard. It also allows users to make payments without having to go through an intermediary, which means they don’t have to pay any additional fees to make transactions.
This means there’s less money in the system overall, and it makes it harder for businesses around the world to stay afloat financially. It could disrupt international trade in goods, services, and capital between countries. Bitcoin disrupts the flow of international trade by making payments faster and more efficient than government-controlled traditional currencies which can be a matter of concern.
6. Disequilibrium and economic imbalance
Some people indeed use Bitcoin as an investment portfolio, but if enough people start using it for everyday transactions then it will become more popular than traditional currencies like dollars or euros and that could lead to inflation. However, the government fears that if Bitcoin becomes more popular, it will cause a lot of trouble in the world economy, which could lead to a global recession.
An increase in demand for this digital currency has caused an increase in demand which in turn causes an increase in supply. This causes price fluctuations which can be detrimental from the government’s perspective. This could also threaten their power over the economy and lead to disequilibrium and economic imbalance in the world.
The government’s stance on Bitcoin has been mixed, and have been reluctant to embrace digital currencies. In some states, Bitcoin is legal while in others, it is not. Some countries embrace Bitcoin while others have banned it from their territory.
The primary reason being there is a lot of money at stake, and it could disrupt the economy as these currencies are extremely volatile. Moreover, people often use it for illegal activities like tax evasion or money laundering, etc. Lastly, they are unable to control their citizen’s financial transactions and spending habits which can create instability in the market.