Ever since Bitcoin captured the imagination of people, there has been a growing interest in Cryptocurrency Poses worldwide. Viewed as an alternative to federal money, Cryptocurrency has escaped the Government’s power to depreciate their currencies through inflation. Now when Facebook has announced creating its Cryptocurrency, the National Government is viewing it as a threat to their monopoly over issuing money.
What exactly is Cryptocurrency?
Cryptocurrency can be called a form of digital asset based on blockchain technology or distributed ledger technology (DLT). Secured by Cryptography, it is a digital or virtual currency based on a network spread across a large number of computers. It makes use of several encryption algorithms and other cryptographic techniques that safeguards entries like public-private key pairs, elliptical curve encryption and hashing functions. Cryptocurrencies are not issued by any central authority, making them immune to the Government’s manipulation.
Talking of the types, Bitcoin was the first Blockchain-based Cryptocurrency, and there are hundreds of alternatives that can be called the forks or clones of Bitcoin. The other cryptocurrencies, known as altcoins include Peercoin, Ethereum, Namecoin and Litecoin.
Cryptocurrency vs Precise Forex
Forex or the foreign exchange market and Cryptocurrency are highly contrasting. While precise forex is issued by the Federal Government and regulated by the FCA (Financial Conduct Authority), the Cryptocurrency market is not restricted, and even worse, from a legal standpoint, it is not viewed as money. The Central banks around the world create cash and print paper notes equivalent to their worth, which is derived by authorities fiat and hence paper forex is also called fiat forex. In the case of cryptocurrencies, anyone can create it by the mining course. While Precise Forex derives its value from the government fiat, Cryptocurrencies derive their value through exchanges— so no government monopoly is involved.
Cryptocurrency Poses A Threat To Government’s Monopoly
Ever since Bitcoin has claimed that ” it is the first decentralized peer-to-peer payment network that is powered by its users with no central authority or middlemen”, the lack of central authority is seen as a threat by the national governments. While some governments fear that Cryptocurrency might be used to circumvent capital controls, illegal purchases and money laundering, others think that it can destabilize the power or authority of central banks. The Central Banks control fiat currencies; they can track currency movement, collect taxes on it, dictate who profits from the movements and trace any criminal activity. When non- government bodies create their currencies, as in case of Cryptocurrency, all of that control is lost, and thus Cryptocurrency is a massive threat to the Government’s monopoly.
Additionally, as it is untraceable, Cryptocurrency can be used to facilitate crime. Terrorism, Prostitution, Drug trafficking, money laundering, tax evasion are some of the activities that are benefited by untraceable financial transactions.