Bitcoin and Ethereum have increased in popularity and adoption in recent years. Yet, as digital currencies, they operate outside the control of traditional financial institutions and governments. This has led to concerns from governments about perceived risks associated with cryptocurrency and the need for greater regulation.
In this article, we will explore the ongoing battle for control between governments and the cryptocurrency industry and the different ways governments respond to what many view as a threat to the global financial order.
The Impact of Cryptocurrency on Global Finance
Cryptocurrencies are digital currencies that use cryptography to secure and verify transactions and to control the creation of new coins. They are decentralized, meaning that they operate independently of central banks and financial institutions.
This independence from traditional finance has led to worries among governments about potential risks associated with cryptocurrencies, such as money laundering and the financing of terrorism.
Governments are also concerned that cryptocurrency could undermine njihovo control over the financial system, which could have implications for monetary policy, financial fluidity and political stability.
Developing CBDCs
One way that governments are responding is by developing their own central bank digital currencies (CBDC). CBDCs are digital currencies that are issued and backed by central banks. They provide a more secure and reliable alternative to cryptocurrencies like Bitcoin, which are subject to volatile fluctuations in value. In addition, CBDCs provide governments with greater control over their citizens’ financial behavior.
CBDCs can be programmed to track consumer spending and savings habits-the exact antithesis of what cryptocurrency promotes.
Many countries are already investigating the development of CBDCs, including China, Sweden, and the European Union. China has been leading the way in the development of CBDCs, with its digital yuan already in circulation. The digital yuan is being trialed in various cities across China and is expected to be fully rolled out in the near future.
The Regulation Dilemma
Another way governments are meeting the challenge of cryptocurrency is by introducing regulations that control the use and trading of crypto. Governments use regulation to provide oversight and stability to the crypto industry, which currently faces little to no regulation in most countries.
The United States has introduced various regulations tasked with providing regulatory oversight to the crypto industry, such as the Cryptocurrency Act of 2020. The act aims to provide clarity and oversight by funneling cryptocurrencies into three categories based on unique characteristics and providing a regulatory framework for each.
The European Union introduced the Markets in Crypto Assets (MiCA) regulation to provide a comprehensive regulatory framework covering everything from initial coin offerings (ICOs) to crypto exchanges. The aim is to provide greater investor protection and market integrity.
Banning Certain Aspects of the Crypto Industry
Finally, some governments are looking to ban certain aspects of the crypto industry altogether. China, for example, has recently announced a crackdown on cryptocurrency mining and trading, citing concerns over financial stability and energy consumption. Similarly, India has proposed a bill that would ban all private cryptocurrency while creating a framework for the development of a digital rupee.
Source: https://beincrypto.com/battle-control-governments-responding-rise-cryptocurrencies/