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How Will Governments React To Cryptocurrency?
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 Some months ago, India’s central bank, Reserve Bank of India directed all commercial /merchants banks and other financial entities to sever their connections with the traders of cryptocurrencies. 

In April this year, State Bank of Pakistan announced its ban on cryptocurrency trade in the country. Many Islamic countries have banned cryptocurrency transactions. 

Bank of Montreal, in Canada, halted cryptocurrency trade, by disallowing purchasing of cryptos via credit card. It is not illegal in many European nations but governments well know that decentralized cryptocurrencies can be a big threat to their authority.

Reasons of governments’ fear:

  • Cryptocurrency can end the US dominance over the world by disrupting position of USD. The USA will never allow this to happen.
  • They can End the Central Banks and Middlemen as the cryptocurrency transaction are decentralized, very fast, maintain privacy and their transaction cost is almost negligible compared to traditional financial system.
  • Proliferation of cryptocurrency transactions will also render governments powerless as their monopoly over money will end.

So, on account of these reasons, governments are against the cryptocurrencies and see them as a big threat on their authority. That is why governments are ready to accept the blockchain technology as this is the technology of the future. But, they can never allow cryptocurrencies to undermine their position. That is why governments are trying to issue their own virtual cryptocurrencies which are not traditional decentralized cryptocurrencies. In fact, they will be centralize cryptocurrencies which should be called government owned virtual currencies (just another form of fiats).

Government of India took a step in this direction when it demonetized its currency notes in November 2016. Now, it is pushing people to use electronic payment. RBI has also announced that government of India is mulling over to issue its own cryptocurrency. Counties like Ecuador, Venezuela etc. have issued their cryptocurrencies. China, Russia, Japan etc. are working on this direction. Many other states are planing in the same direction. So, one day we will have government owned virtual money all around. People will accept it with pleasure as they will think it safer than the private owned (decentralized as largely mined by private players) cryptocurrencies. It will be an era of virtual money. Centralization of wealth will touch the unprecedented height. People will be forced to do what government will order them; otherwise, their transactions would be disallowed. So, it can lead to a world clearly divided in masters and the slaves.

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Many governments have already reacted to it imposing regulations and trying to tax blockchain transactions. In time, regulation will creep in even more as people start to understand blockchain better and as it becomes a more mainstreem system of use in our society. Blockchain is here to stay so everyone is trying to figure out how to implement it and how to regulate it.

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