The first peer-to-peer digital currency introduced in 2009 was bitcoin. To date, it has attained a lot of popularity that some of the countries have approved its use in transactions. However, the best practices of this currency are still in question.
Unlike Fiat currency, bitcoins are not issued and regulated by central bank. Specifically designed complex computer systems are used to mine these coins. It offers a convenient way to make cross-border transactions.
Many people are looking to invest in this currency to repay their debt. Sometimes the burden of financial debt is so huge that you fail to settle debt consolidation loans with no credit check. By investing and selling bitcoins you can easily get rid of your debt.
The United States of America, Canada, Australia, Finland, Belgium, Cyprus, the United Kingdom, Germany and Bulgaria have approved the use of the digital currency while China, Russia, Vietnam, India, Ecuador and Columbia have banned it.
Whether these countries have banned or not, the use of bitcoin is all the world over. Some people use bitcoin network for making illegal transactions. Now the question is whether these coins are legal or illegal, and if illegal, why some countries are not looking to approve the use of these coins. According to the current scenario, it has been the grey area.
Bitcoin cannot be considered a legal tender because the operations are not in the jurisdiction of law. People use them for payments only when both parties agree upon the use of the currency. Legal classifications are still in the shades of doubts as each regulatory body has put forth its own opinion. Some countries classify them as virtual currency, some categorize them as a commodity, and some classify them as property.
Bitcoin is the first peer-to-peer decentralized digital currency, which is one of the biggest reasons for several government authorities to ban it. To delve into why governments have prohibited the use of the currency, continue reading.
Lack of trust
Traditional currency, also known as fiat currency, is regulated by government. The currency has particular value. The currency is issued to you that you use to make any kind of purchase. You are the bearer of a note that you carry. It is not like that you will return the currency to the government in exchange of gold or something else. It is a legal tender and it is not as volatile as digital currency. All transactions are made through your bank account, which do not show to others.
However, it is not possible in case of block-chain. It follows a centralized ledger, which means all transactions are visible to public. Further, you cannot alter what had happened in the past. Banks and financial institutions follow laws and perform within all best practices to make sure that no fraud is made. This is not possible with block-chain network.
There is no control of government
Government control over fiat currency helps the central bank to decide on issuance and destruction of money after careful analysis of monetary policy and economic influence. This control helps in tracking money, collecting taxes, traces criminal activities.
Bitcoins are regulated by non-government bodies, which means no control. This leads to flood in criminal activities, money laundering, and supply of the coins. The concept of demand and supply impairs badly.
It is imperative to have control over the circulation of money as it helps in stimulation of investment and spending. It also helps avoid inflation, recession and unemployment. Control over currency is a big concern that is not associated with bitcoin mining.
Business will be ruined
Mining produces bitcoins. The mining is done with the help of specialized computer programs. Miners solve computational programs that give the reward in a form of digital currency. It is stored digitally and can be moved between buyers and sellers without the need of third party or regulatory authority. You can use the currency to buy jewelry, ticket, or any other item.
It seems good to hear, but every coin has two aspects. The entire banking system will go on failure if cryptocurrencies are widely accepted. It is important to be an intermediary who could help you when you get into financial trouble. How will you earn interest on savings? Who will help you if your account is hacked? Financial institutions generate a lot of job opportunities that will disappear into thin air. With banks, you know whom to turn to at the time of grievances, but bitcoin blockchain is extremely dynamic that you may lose huge money and become bankrupt in a matter of seconds.
Criminal activities will increase
There are a number of non-criminal uses of bitcoins, but their use is subject to illegal activities too. Lac of intermediary and privacy are most common factors that benefit to criminals. The crypto world is associated with Dark-net feature that allows criminals to make transactions for illegal activities. Dark-net is the portion of the internet willfully kept not open to public that makes difficult to track and identify the transaction. Bitcoins are most commonly used for making payments for drugs, illegal weapons etc. Some people use these coins to pay hackers who steal financial and personal information. Bitcoins are most commonly used digital currency in making illegal transactions because there is no physical location connected to the wallet. It makes arduous to track perpetrators.
It is not clear why some countries have legitimatized the use of this digital currency, but you must have got the idea why some countries are not in favor of approving it as a legal tender. Decentralized currency has fewer advantages than drawbacks. You cannot dream of living in a safe country if it takes over fiat currency.
Description: While some countries have legalized bitcoins, there are some countries like China, India, Russia where these coins are banned. This blog discusses the reasons.