WHY IS THE GOVERNMENT AFRAID OF CRYPTO-CURRENCY?

 

Ever since the inception of currency it has evident many changes. However, with change of time the value and acceptance might have changed but not the importance. But the modern era is witnessing a paradigm shift when fiat money is losing its sheen and crypto-currency seems to have outpaced the traditional mode of transaction altogether. The idea of accepting crypto-currency might seem vague and psychic as a constant debate is going on but the reality might differ otherwise. At least that is what oxford dictionary explains, however the logic is partially correct in economic reference. However, the world is witnessing a radical change when people’s acceptance is shifting from fiat money to crypto. In a recent trend leading global investment and securities firm Goldman Sachs announced to launch its own crypto-currency ‘Stablecoin’. Goldman confirms that the stablecoin is available for institutional users only and not for the public. Goldman Sachs is not the first to advocate the crypto currency. Social networking site Facebook also tried their hand but failed to launch ‘LIBRA’ due to monitoring and regulation concerns which lead to step back the payment gateways like MASTERCARD and VISA. Similarly, according to recent news MASTERCARD and VISA refused to launch their own currency. Yet this block chain technique driven currency firms like Circle & Bitgo, Coinbase, Anchorage and Fold are already dealing with crypto currencies.

Moreover, if we buy the logic of American parliament over the regulation and security issues in LIBRA case, one must exemplify Square’s Cash App for supporting bitcoin since 2017. BitMex evidently accepts crypto over fiat.  On the other hand the largest crypto-currency Bitcoin reported to have plunged almost $10,000 in just 6 weeks. The fluctuation in the value of bitcoin has been observed for almost a couple of weeks. The news gave a new hope that the crypto currency might sweep over the physical currency in future. The recent development discards the economic and security concerns related to it. Amid global pandemic when the global economy is slow paced the investment pattern of the public shows a paradigm shift as only gold and crypto currencies seems securing a new height. A common heuristic approach suggests that even sovereignty of government seems insufficient to avoid investment in crypto-currency. Besides, there are various other reasons as to why these currencies are high in demand. In crypto currency the processing charges are low compared to financial institutions and banks. Crypto currencies offer hedging against inflation. Most importantly there is no middle man or third party required.

However, the government’s concern can not be sidelined as crypto currencies are difficult to be regulated and administered the origin, value and uses of it. Besides, diplomat and experts suggest that it might develop a parallel economic system that can not be regulated and peril the economy of a nation. Indian government has already declared a ban on crypto currencies but the eastern European countries like Ukraine seem much eager to adopt it anyway. There are certain basic things that every government should think about:-

·        Since the global acceptance of crypto currencies is growing day by day and this may pose potential threat to the economies if not handled properly.

·        Investors are more concerned to make an investment that can offer them greater return.

·        It is much more than sovereign guarantee and security rather than hedging the inflation, high returns that should be the main concern of the government.

·        Crypto currency can provide an equal platform to all the nations by discarding the economic power of fiat currency of a nation. As a result parity can be developed amongst nations.

·        Unlike many other technical aspects regarding regulation of such currencies, the government should also develop a perspective to see the positive aspect it can bring forth.

·        Most importantly the objection against crypto-currencies does not hold a very strong logic to discard it rather superficial. Developing countries are not much tech-savvy where as developed nations do not want to marginalize their economic power.

One has to understand that the real problem is not with how to regulate, administer and define the value of crypto currencies rather what if the fiat money will be replaced by actual one. Even if the concerns related to crypto-currencies can not be sidelined yet the banking and economic system should be ready to develop a system that can safeguard the economy.

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