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Analyzing the concerns of governments towards cryptocurrencies!

by James Musoba
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Ever since their introduction, cryptocurrencies have faced major controversies regarding their security and legality. Powered by Blockchain technology, digital currencies cannot be brought under the regulations of a central authority. Being decentralized, it is prone to criminal activities. Governments across the globe are wary about cryptocurrencies, and some refuse to consider them legal as per their nation’s laws.

  • The part played by the government in an economy: 

To know why the Governments are concerned about cryptocurrencies, we must see the role of traditional currencies in an economy.

  • The nation’s central authority issues fiat currencies, and thus, they do not raise any questions regarding legality.
  • In case of a default, the government takes full responsibility for the borrowers regarding fiat currencies. Due to the decentralised nature of cryptocurrencies, central organizations can have no control over them.
  • The cycle of transactions and interchanges in every nation involves lenders, borrowers, and customers who trust the supply chain between every party in the procedure.
  • Tactile assets do not back up cryptocurrencies. It often manipulates the economy of a country, giving rise to fraud cases.
  • The government facilitates the role of central banks in an economy, central banks have the authority to make policies regarding money, but they cannot regulate it.
  • Banks distribute currencies among financial institutions, which maintain the flow of cash in an economy.
  • Cryptocurrencies sabotage the cycle of trust:

The decentralized feature of digital currencies has the strength to alter the natural flow of money in the economy.

  • The network of cryptocurrencies is unreachable by the government due to its decentralized nature. Trading cryptocurrencies can be difficult for beginners. Click Bit-QT Trading App to learn some strategies for trading.
  • A government has no role in producing cryptocurrencies as anyone running a full node can mine digital currencies and produce them.
  • The peer-to-peer transactions taking place in the case of digital assets do not involve any third party. This ceases the requirement of intermediaries in the system.
  • The chain of trust in the supply chain becomes an algorithmic construct in the network of cryptocurrencies. A transaction is not added to the central ledger until all the nodes authenticate it. A slight disagreement in the transaction can lead to rejection.
  • Why the Governments are heedful of cryptocurrencies:

The central authorities across the globe are still trying to understand the impact of digital currencies on a nation’s economy.

  • Bitcoin can bypass government-imposed policies – often, capital control policies are imposed by the governments. It stops the outflow of currency as it may debase its value. In such a scenario, the stateless nature of Bitcoin comes to bypass capital control rules and export wealth.
  • Illegal activities linked to cryptocurrencies – since digital currencies can bypass the present financial infrastructure of a country, criminal activities are more persistent as a result of it. Users on the network can only be identified by their holder’s address and nothing more. Hence, no one can track a user in disguise individually. Recently, infecting popular applications with ransomware and demanding payment in Bitcoin has become common among hackers.
  • Cryptocurrencies are not regulated – it has been more than a decade. Governments across the globe are still figuring out ways to control cryptocurrencies. The lack of faith of central authorities towards cryptocurrencies is also because of the lack of a transparent ecosystem.
  • The rise of cryptocurrencies:
  1. The Blockchain technology that powers cryptocurrencies can create unique and irreversible digital records.
  2. The present world utilizes cryptocurrencies as an alternative for fiat currencies. There are several benefits associated with cryptocurrencies, one of them being its online mode of transaction.
  3. It leads the banks to consider creating their cryptocurrencies, which would bring a revolution in the economy of the nations.


Being decentralized in nature makes cryptocurrencies prone to criminal activities and frauds. Although cryptocurrencies provide several advantages, it is still unacceptable by several nations.

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