Fighting for Bitcoin – Is Cryptocurrency Trading a Threat to Government Policies?

February 4, 2018 7:27 AM UTC

The mere fact that Bitcoin is decentralized concerns governments at global scale because only a centralized system can be in full control. Mark Zuckerberg argued in a recent statement that the people once believed in the decentralized nature of technology. Over the years, they’ve lost faith because governments are now using it to manipulate the masses.

“Cryptocurrency takes power from centralized systems and puts it back into the hands of its rightful owners – the people”, said Zuckerberg in a post on Facebook. Bitcoin is risky because it’s difficult to keep under control, although at the core of the crypto world lies a purpose: the ability of cryptocurrency to reconstruct financial systems leveraging transparency and eliminating the dire need to trust; and when there’s no reason to doubt there’s no chance for deceit or fraud.

High-level security, transparency and trust are three of the main benefits that Blockchain technology and Bitcoin can provide, and the democratization of money seems to be the greatest financial revolution of the century. Regardless, governments around the world are trying to make Bitcoin a pariah of society. Illegal trades, cybersecurity breaches, volatility, and ICO scams have persuaded countries like South Korea to regulate Bitcoin.

As cryptocurrency falls under government scrutiny in Asia, Europe seems to be on the verge of building a crypto-based empire. Countries like Germany, Switzerland, Denmark, Sweden, and UK see the good in cryptocurrency, the influence it holds, and, ultimately, the power it has to disrupt centralized governments and revolutionize financial systems.

Bitcoin – a Great Friend but an Even Greater Foe

Big governments around the world are catching up with the cryptocurrency craze. Apparently, they’re on a hunt for blood. After announcing the ICOs are greatly influencing financial and economic order in China, the government banned all forms of ICO funding. It happened in October 2017, with bitcoin losing nearly 10%, Litecoin 24.92% and Ethereum 21.74%. In Venezuela, the government has began locking up Bitcoin miners, although because of the severe financial crisis, cryptocurrency might actually help overcome a complete financial blockage.

Previously the head of the state Nicholas Maduro has said Venezuela would issue 100 million tokens, each backed by the equivalent of one barrel of Venezuelan oil. This will make the entire value of tokens a little over $6 billion. The pre-sale is about to start on February 20th, but critics strongly doubt that such measure could pull the country out of the economic crisis. Besides, some consider it illegal.

As far as South Korea is concerned, which is also one of the most popular Bitcoin markets in the world – the ban on anonymous cryptocurrency trading has just been enforced.

The overall crypto market is challenged by Asian regulations, and as of January 30 South Korea Financial Services Commission enabled a set of rules that allegedly are meant to reduce illegal cryptocurrency activities, such as “money laundering, crimes, and tax evasion.” The new terms and conditions imposed challenge the status quo of cryptocurrency, which is anonymity. All traders will have to link their crypto exchange accounts to their bank accounts using their real names.

The South Korean situation with the crypto market is, at the very least, complicated. At first, the government’s intention was to ban crypto trading entirely. But the Korean people reacted and filed a petition to fight than. They called it a “happy dream”, and its intention was to compel officials to declare their crypto assets. After dealing with several pain points related to privacy failure, several Korean crypto exchanges were penalized, influencing once more the price of Bitcoin.

Rather than befriend Bitcoin, big governments in Asia and the US claim their actions are meant to protect the people from market manipulation. However, they’re actually attempting to kill a currency that poses a threat to government monopolies on seigniorage income and printing money. Somewhere somehow, innovators who understand the crypto world were joined by enthusiasts and early adopters that see the potential of an “exotic” currency – a better, more transparent hedge that’s better than gold, can be used for cross-border payments, and has a limited supply of 21 million.

Things could take a turn to the better in Europe, where a member of Germany’s Bundesbank, Joachim Wuermeling, highlighted that an attempt to regulate Bitcoin and other cryptocurrencies would demand international cooperation, as “the regulatory power of nation states is obviously limited.”

On December 22, Belarus legalized cryptocurrency transactions, marking the beginning of a journey to attract foreign investment and foster growth in the private investing sector by freeing the people from Soviet-style stigma. In Russia, The Ministry of Finance recently presented a Digital Assets Regulation Bill meant to legalize and regulate cryptocurrency trading, mining, and ICOs. Given that the Central Bank of Russia is a centralized entity, the officials disagree on several grounds, emphasizing the cryptocurrency trading rule should apply to tokens with real potential to attract viable financial investments.

The creators of the bill argue that legalizing cryptocurrency would reduce financial fraud and provide better fiscal transparency. But approving the bill doesn’t mean cryptocurrency will become a legal payment instrument in Russia, as trading would only be allowed through compliant exchanges.

They Can Crush It, but They Can’t Kill It

Even after China’s ban on ICOs in Oct. 2017, Bitcoin didn’t give up. It came up stronger than ever increasing in value from $4,000+ in October to nearly $20,000 in Dec. 2017. Because centralized governments will always hold monopoly on the value of money, Bitcoin enthusiasts will never get to see cryptocurrency replace national currencies. Regardless, just because South Korea, China, the US and other countries can crush Bitcoin by issuing new regulations and influencing cryptocurrency prices, it doesn’t mean they can kill it.

On the bright side, blockchain technology is way too powerful to be put down by big governments, and Bitcoin will always remain a collectible digital currency for savvy enthusiasts that understand how technology works, and the potential it has. This 2018, we’re looking at more and more companies eager to accept cryptocurrency as an official payment mode, including Microsoft, PwC, and online retailer Overstock.

Late last year, CME (Chicago Mercantile Exchange) and CBOE (Chicago Board Options Exchange) launched Bitcoin futures, proving market confidence in Bitcoin, and strengthening the fact that cryptocurrency is here to stay. Cantor Fitzgerald and NASDAQ are also making plans to develop their Bitcoin derivatives contracts. Furthermore, Intercontinental Exchange Inc. (ICE) recently looked into the possibility of creating a data center in partnership with Blockstream Inc. The goal is to provide hedge fund investors with a crypto-based price data feed that will provide real-time information from 15+ exchanges.

Last but not least, Goldman Sachs has plans to designate a Bitcoin trading desk, highlighting that more and more institutions are open to accepting and adapting in an already decentralized financial ecosystem.

Author: Vladimir Smerkis is the co-founder and managing partner of Tokenbox, a unique ecosystem that combines cryptocurrency funds under the control of professional portfolio managers and traders on the one hand, and investors on the other.

Last modified: May 20, 2020 9:08 PM UTC

Show comments