Virtual currency has opened pathways to a novel financial era. In particular, cryptocurrency is highly involved in this consideration. With the innovation of bitcoin as the first peer-to-peer transaction network, many cryptocurrencies have come into action. Due to the decentralized nature of cryptocurrency, it simply removes the middle man, such as banks and card centers. In basic terms, it removes the central authorities from transactions. This scenario has led governments to fear cryptocurrency. Why do governments fear cryptocurrency? Let’s discuss the latter portion.
Before getting into the main consideration of our topic, it is important to get a brief idea about the relationship between fiat currencies and the government. Simply, the financial needs of a country or government are regulated by the fiat currency. The amount of conventional currencies is also a basic unit of display of a country’s assets. You can’t give the cashback to the government in exchange for what you buy, or anything else of value. Fiat currencies are backed only by the government that issued them, and not by anything else. If you want to satisfy any of your needs, you must exchange your fiat currency with someone or something that owns the item. Though fiat currency circulation is a hard concept to understand, it is all around every country and state.
Governments fear cryptocurrency because control matters.
In general, fiat currencies are controlled by the government. The fiscal policy of a country depends on the decisions of the government. The central bank of a country is the responsible party for issuing and destroying fiat currency. Because of this, the central bank controls the transactions of a country. Basically, it gives better transparency and monitoring of currency usage. One of the closest incidents is the monitoring of criminal activities. Because the currencies are monitored, it gives help in tracing criminal and illegal activities.
But, with the rapid use of cryptocurrency, this control is lost. Since no central authority is involved in currency activities, no tracing is done in such cases. Cryptocurrency removes the centralized authority in its transactions due to its decentralized nature. On the other hand, cryptocurrencies are highly appreciated for their anonymity. Therefore, crypto transactions provide ease for illegal activities. This is also said to be a downside of cryptocurrencies. There is no doubt that cryptocurrency offers many fortunes and benefits for users. But it is important to use it for the betterment, not for the bad!
- The above discussion is neither financial advice nor financial recommendation. It is a basic study on cryptocurrency which is done based on resource sources. Therefore, our team accepts no responsibility or liability for any predictions/decisions you make in the industry.