Over the past year some governments, and politicians have expressed that they are not exactly in love with crypto. Back in fall of 2021 Hillary Clinton opened up about her opinion of crypto saying “What looks like a very interesting and somewhat exotic effort to literally mine new coins in order to trade with them has the potential for undermining currencies, for undermining the role of the dollar as the reserve currency, for destabilizing nations, perhaps starting with small ones but going much larger.” In 2021, China along with a few other countries also banned crypto. So what are the concerns of these government leaders regarding crypto?
These are 3 of the common reasons governments don’t like crypto:
- It has the potential to undermine the government’s role in the financial system
- It poses a threat to central banks
- Concerns with crime
1. It has potential to undermine The government’s role in the financial system
Government has control over Fiat currency and therefore fiscal policy, and monetary policy. Crypto takes this power out of the hands of the government. To really understand the full potential of cryptocurrency and blockchain over economics, let’s take it to an extreme. At its maximum potential, everything on blockchain and crypto is a trustless, decentralized, peer-to-peer system, which is also untrackable by the government – assuming that cryptocurrency was universally accepted by merchants and you never needed to exchange it for Fiat currency.
2. It poses a threat to central banks
Leading straight in from the last point, the potential for decentralization to become completely free of central banks is entirely possible. In decentralized economics, there are ways for individuals to contribute to the system and earn a return on their savings through Defi protocols such as lending, staking, yield farming, and Liquidity pools… all of which at this point will earn a much higher interest rate than a savings account, bond yields, or even some dividend stocks. If you wanted to take this idea even further, from a technological standpoint it is entirely possible to have a fully decentralized bond and equities market built on blockchain that interconnects with the rest of the ecosystem. The possibilities are almost infinite.
3. Concerns with crime
Along with decentralization and crypto comes the possibility for heavy use of Bitcoin in widespread international crime. This is a cause for concern for governments because the ease and ability to transact off of the books through crypto means criminals can use it for virtually anything from drug networks to sex trafficking, anonymous online exploitation, even to terrorist organizations.