The Love-Hate Relationship between Governments and Cryptocurrencies
Governments and Cryptocurrencies don't mix well
Governments and cryptocurrencies have been mutually suspicious of each other for a while now.
So much so that when it comes to the latest cryptocurrency news, all we see are the governments fighting cryptocurrencies and vice-versa.
Governments always drive cryptocurrency investors crazy by using virtually every means available to them to restrict, regulate and in many cases ban outrightly the use, mining of or even communications regarding cryptocurrencies.
To resolve this problem, we have to consider several factors that have played out in the current situation.
Most Cryptocurrencies are Decentralized in Nature
The mere fact that most cryptocurrencies (from Bitcoin to Ethereum and so on) are decentralized in terms of nature and operations have scared the wits out of many Governments.
The fear of the loss of control of a country’s national currency is one very powerful factor that most Governments can’t imagine occurring.
This has even led to the outright ban of cryptocurrencies in many countries.
Most governments fear that once they allow the various activities surrounding cryptocurrencies to become legal and lawful, a whole lot of control will be gone.
In many cases, this is true while in others nothing could be further from the truth.
When it comes to blockchain public-interest technologies such as Bitcoin, the loss of control by national Governments can be quite overwhelming.
However, Bitcoin transactions per Country can be tracked due to deep learning models which can predict where wallet transactions are coming from and where they are going to.
Private-interest technologies on the other hand such as Facebook’s Libra, Ripple Lab’s XRP and a host of others tend to follow the concept of “centralization in decentralization”.
As such, Governments tend to prefer working with these models than to work with the public-interest decentralized ones.
Many Governments are Afraid of New Technology
Most people are afraid of what they don’t understand.
This principle also applies to governments.
Most Governments still don’t get how cryptocurrencies work.
As a result of this, most choose to shy away from the fact that cryptocurrencies are a big deal.
Many politicians may not admit it, but it is true.
Facing an unknown variable which may or may not favor the next election cycle is something most politicians always as a matter of necessity and political survival try to avoid.
New technology also presents its own set of challenges.
Criminals and those with dark minds are often the first to take advantage of new technologies.
This threat is one issue that many Governments consider when they impose heavy restrictions on cryptocurrencies.
Until understanding is achieved as far as cryptocurrencies are concerned, there would be restrictions one way or the other with many governments.
If people take time to adopt new technologies, then it would take even more time with governments.
Many Cryptocurrencies are Pseudonymous or Completely Anonymous
The mere fact that many of the cryptocurrencies that exist and have some value are pseudonymous; some even to the point of outright anonymity is one of the greatest factors that hinder governments from finding the right balance where cryptocurrencies are concerned.
Governments love to poke around every aspect of the private lives of their citizens.
This nature of many governments, to be the “big brother” or the “all-seeing eye” over their citizens has made the relationship between governments and cryptocurrency startups somewhat chaotic.
This, of course, has made many governments somewhat skeptical of cryptocurrencies as a whole.
In today’s society while some anonymity is great, too much anonymity is not so much of a good thing and total anonymity means that something is fishy.
This is how many governments think and, in many cases, they are right to think so.
As a result of these anonymous cryptocurrencies, other cryptocurrencies suffer.
Traditional Systems Fight Back
No one wants to be left behind in the technology race.
Cryptocurrencies and their underlying technologies are the future.
Many centralized systems are caught in the past.
As such, they use their dominance in the regular world to fight this nascent technology.
Of course, perception drives reality and this is ever-present when cryptocurrencies are mentioned.
Governments love the cash cows that pay huge amounts of taxes.
Many of these aging systems pay taxes and we all know how all governments love their taxes.
As such, these big guns in the private sector work in concert with such governments to frustrate cryptocurrencies without trying to figure out how best to work with them and still get taxes and profits.
Most governments lose out on the great things that could be achieved through the implementation of the technologies that drive cryptocurrencies due to this.
Finding the Right Balance
The right balance can be struck between cryptocurrencies and governments by a few simple steps which form the basis for the acceptance and adoption of other kinds of technologies apart from cryptocurrencies.
Governments the world over first have to study what exactly cryptocurrencies are, what they are used for and how they can be used in government activities.
Governments should also find startups and technology companies who are involved in cryptocurrencies and dialogue with them.
They should also figure out which investment opportunities lay in the use of cryptocurrencies and their underlying technologies.
When it comes to fighting cryptocurrency-related crimes- The Many Uses of Blockchain Technology, working with other governments and interested parties globally will help in creating solutions that will help curb the spread of criminal activities.
In essence, the greatest beneficiaries of cryptocurrencies are the governments themselves.
They just don’t realize it yet.
What do you think?
Is there a love-hate relationship between cryptocurrencies and governments? How can this be resolved?
Please let us know in the comments below!