Bitcoin has enjoyed rapid and widespread adoption since its inception in 2009. Many businesses and individuals increasingly use Bitcoin to send and receive money worldwide.
Unlike the conventional financial systems, Bitcoin payments are safer, more reliable, and relatively cheaper. Besides, Bitcoin’s high value and projected growth have also caught the attention of global investors and corporations.
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Despite Bitcoin’s positive reputation, it is also subject to several criticisms that have slowed its global adoption in recent months. For instance, a few countries, including China and Russia, have recently mounted intense crackdowns on crypto transactions, issuing outright bans on their usage. So, why do some countries crackdown on Bitcoin? This article discusses the main reasons behind Bitcoin crackdowns in some countries.
Cryptocurrencies Encourage Criminal Activities
Cryptocurrencies like Bitcoin are digital means of payment, only accessible virtually. Unlike banks and other traditional financial systems, crypto transactions are decentralized.
Bitcoin users can transact independently or through crypto exchange platforms such as www.yuan-paygroup.com. That enables users to bypass intermediaries and regulatory requirements, transacting anonymously.
Some governments fear allowing people to bypass regulatory measures and transact anonymously could encourage crimes such as fraud, money laundering, and terrorism funding.
Skeptics argue Bitcoin’s decentralization prevents the regulators from monitoring and tracking financial transactions. It creates a loophole for cybercriminals.
However, such claims cannot be further from the truth. Bitcoin payments are anonymous but, that does not mean transactions are untraceable. Bitcoin’s blockchain validates all users’ addresses and transactions on a public ledger, ensuring transparency and accountability.
Besides, forensics experts have developed various mechanisms and tools for tracking the identities of Bitcoin users and funds’ movements.
Bitcoin Threatens the Stability of Fiat Currencies
Handful countries have also complained that Bitcoin is a disruptive currency that destabilizes central banks-issued paper money. Those arguments mainly criticize Bitcoin’s decentralization that makes it resilient to government, institutional, and market influences. They say the absence of a central entity to regulate Bitcoin impacts rapid and enormous price swings, threatening the value of fiat currencies.
Unlike fiat money, Bitcoin has a fixed supply of 21 million tokens only. That number reduces over time due to halving and other factors. Based on supply and demand economics, Bitcoin’s diminishing supply drives its demand, increasing the value significantly over time. That is why some governments are concerned Bitcoin’s increasing adoption would weaken the value of their fiat currencies.
Bitcoin gives its users the power to manage and store their funds and assets how they want, without external intervention. Its value mainly increases or drops based on public perception. Thus, some governments fear Bitcoin would empower a few wealthy crypto-friendly individuals to manipulate the financial markets and destabilize local currencies. However, Bitcoin’s unique properties also make it less susceptible to market manipulations or political influences.
Bitcoin is Not Subject to Government Regulations
Traditionally, governments enjoy absolute control over their financial systems. They mainly use regulatory institutions such as the central banks to implement various laws, controlling all financial transactions. Although regulatory frameworks protect businesses and consumers against some financial risks, they also impact serious inconveniences.
The governments cracking down on Bitcoin are scared virtual currencies’ decentralization will deny them the power to control transactions within and across their borders. The majority are concerned the absence of regulatory frameworks for Bitcoin transactions creates a free environment with far-reaching risks, including national security.
Bitcoin has proven its more tremendous potential in promoting financial inclusion and access to capital worldwide. It facilitates secure, prompt, and low-cost international payments. Thus, the ongoing crackdowns in some countries are impediments to development and innovation, hindering their citizens and institutions from enjoying the unique Bitcoin benefits discussed above. Nevertheless, it won’t be possible for any government to bring down Bitcoin because it is decentralized.
