Why Are Governments Really Opposed to Cryptocurrencies?

By Achal Arya
February 4, 2020 Updated February 4, 2020
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When it comes to politicians it seems that the only common thing about them is that they cannot agree on anything. However, recently another thing emerged that all the world’s governments are uniformly opposed to. Sadly, it’s not nuclear weapons or acts against human rights. It’s a cryptocurrency.

Every expert in the finance industry agrees that the potential of cryptocurrency is incredible. Simply by making remittances cheap, it can trigger a huge change for third-world economies. And yet, this power isn’t realized and mostly it’s because of the blockages from governments.

Why is that so? Don’t the governments want what’s best for their countries?

To understand why those in power are so wary of crypto and all it entails you need to understand the impact that it’s already had. 

The Rise and Downturn of Crypto Over the Last Decade

There can be no arguing the fact that the rapid rise of crypto is one of the most important things that happened in the last decade. However, aside from its stellar rise to prominence we also witnessed its sudden fall.

Bitcoin, the foremost cryptocurrency in the world even today, shows this change most prominently. Its value went from about $1,000 to $20,000 to $3,000 and then $10,000 all in the span of two years. That rate of volatility is concerning, but studying the latest bitcoin value trends one can see it’s more or less stabilized.

The same goes for the cryptocurrency market as a whole. It’s not insanely booming as it did in 2018 but it’s also not rapidly declining. But the most important thing to ask here is why did that decline appear in the first place?

Any matter of global finances is complex and therefore influenced by a gazillion of factors. However, it’s a fact that one of the main reasons for the sudden downturn in cryptocurrency is multiple anti-crypto policies. Multiple governments of the world panicked as they saw the rapid rate of crypto growth and took steps to slow down or stop this process completely. Some even went as far as to ban bitcoin and other cryptocurrencies.

But of course, such a global power cannot be stopped. Therefore, while the rise of crypto was hindered, the trend for using blockchain technology and digital currencies remained. Today it’s evolving to fit within the legal regulations or work around them. This proves that despite the best efforts of politicians, the future of crypto is bright.

The Impact of Cryptocurrency on the Global Trade

First and foremost, cryptocurrency has the power of making global trade both fast and more affordable. This alone grants it the power to revolutionize the world economy completely. It’s because, despite all the progress in this area, the mechanics of currency transfers are complex and unsafe. Online currency transfer platforms made great improvements in some parts of the world and cut the costs of transfers to under 1%. However, cryptocurrency can make them virtually free.

Moreover, blockchain transactions are instantaneous and extremely secure. This means that global trade can speed up and reduce the level of risk for multiple businesses.

The result is that should cryptocurrency become universally accepted, the global trade will change beyond all recognition. Millions of businesses will receive limitless opportunities for growth and collaboration as cross-border payments will no longer eat up their profit margins.

Cryptocurrency is also untaxable, which means even more savings for businesses and investors. Therefore, they will have more funds to use for growth, boosting the global trade further.

But that lack of taxes is one of the biggest issues that governments have with cryptocurrency. Unlike fiat money, blockchain cannot be controlled and manipulated for political and economic machinations. So, is it really any wonder that governments are so uniformly against it?

Cryptocurrency as a Hedge for Government and Economic Failures

Another important thing to consider when discussing cryptocurrency and its impact on global trade is that crypto itself has become a hedge. In fact, it’s currently growing in popularity as a hedge protecting people from bad governments, in particular.

Yes, volatility does pose some risk, but this risk seems huge to those who live in the US or top EU countries. For people of Venezuela, for example, that volatility isn’t such a big issue as compared to the dramatic weakening of their fiat currency that resulted from the government’s dreadful policies.

In response to similar situations, people are now considering investing in cryptocurrency the same as investing in gold. Many of them choose this as an alternative to converting their funds to USD, which has long been considered a “hedge currency”. This only adds to the list of reasons why governments, and the US government in particular, are using different means to hinder the progress of crypto.

What Is the Future of Cryptocurrency in Our World?

The government’s need to control the population and money flow is hindering the development of cryptocurrency. However, even unfavorable policies cannot stop the decline of fiat money. Leading financial institutions understand this, so they are trying to jump on the cryptocurrency bandwagon right now.

Bank of England is showing the way by announcing it considers adopting cryptocurrency. It’s currently investigating the risks and benefits of using electronic money. In the world that’s rapidly becoming cash-free, this is an example of forward-thinking that might make the difference for this particular financial institution.

As banks are rapidly becoming obsolete even for regular money transfers, they are searching for solutions. Money transfer platforms, which offer lower rates and better terms than banks, have a huge competitive advantage. These companies have already pushed banks and traditional money transfer providers to look for any way to improve their own offers. Otherwise, they will be completely ousted from the market.

Adopting blockchain and cryptocurrency is one of the solutions that banks are using to survive today. Over 200 of them are already accepting Ripple and other similar experiments with crypto are running in all major banks.

Money transfer companies also don’t want to be left behind. Some of them, like Abra and BitPesa, accept cryptocurrency payments.

All these developments show that crypto definitely has a future. As the decline of cash is definite, blockchain can be the solution that will revolutionize the world economy. However, for this to happen, a change must start at the government level. Until digital currencies are, at least somewhat, legitimized, they won’t be able to realize their potential.

Achal is an entrepreneur and a product designer with a bachelors degree in Computer Science. He works in the Web3 domain and manages new developments at Coingape. Follow him on Twitter at @arya_achal or reach him at achal[at]coingape.com.
The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.

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