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Bitcoin is a Gift for Governments and that’s Why Many are Legalizing the use of Crypto

November 28, 2018

Bitcoin And Governments

Think about this: censorship resistance, decentralized, digital and cryptographic money. That’s what Bitcoin is. Many say the coin is the future of money. And it has all the properties of being the radical change that the world has been waiting for. After all, Bitcoin, unlike other cryptocurrencies, is stateless and with no particular leader, developers and even users from different parts of the world can relate to Bitcoin.

The Americans look at the Bitcoin Foundation and some of their key developers within Blockstream, the Japanese look at the name of the network’s founder Satoshi Nakamoto and draw familiarity while the Chinese argue that they power the network because of the centralization of mining in their country. The irony is despite being one of the few countries that have banned transaction in cryptocurrencies, China plays a critical role in Bitcoin and cryptocurrencies in general.

But looking at Bitcoin—its distribution, digital, global and communal nature, would it cause some seismic shifts between governments and citizens assuming Bitcoin goes mainstream? Remember, and we cannot hide our heads in the sand about this and realize that despite all the rosy overviews, the coin was designed to act as a battering ram for established financial institutions and governments.

But even still, most are now opening up doors for this radical, anti-government coin. Japan did and the USA considers Bitcoin and cryptocurrencies as commodities subject to capital tax gains effectively legalizing the coin though not accepting it as legal tender for obvious reasons. In the US state of Ohio, the State Treasurer forwarded an idea which was implemented and going forward 23 different types of businesses can pay their taxes in crypto.

So, looking at these interesting developments, what is making these governments accept Bitcoin? Well, here are some reasons why:

Government Are Opening Up and Promoting Innovation

Well, this is not rocket science: Governments are bullish on blockchain technology–which powers one of the many trillion applications including cryptocurrencies that can sprout out of this digital platform.

Therefore, while cognizant of the fact that all innovation might as well be good innovation and the need of supporting them by not overregulating the space despite lurking risks, it’s likely that the success of Bitcoin could spur the development and growth of enterprise level blockchains that will come handy for these governments.

The other explanation for this is the governments are “pattern matching” blockchain/Bitcoin with the internet.  The wait and see approach the government took during the early stage of the internet was very instrumental for its success and they intend to do the same with blockchain. However, should Bitcoin evolve and threaten to build a wall between transactions and surveillance then governments would have no option but to crash the network as it would view it as a security risk.

Bitcoin a Gift for Government Agencies

Another explanation to this open-nature by governments is a quick realization that Bitcoin though global is not a sovereign threat. In fact, it can be the opposite.  Bitcoin is not Monero and under the veil of transparency, agencies can track all your transactions and any lapse and your identity will be cracked. This is so because Bitcoin is pseudonymous.

How is this possible? Well, investors needed to get in early and with this, they need to exchange their fiat to Bitcoin. Several fiat-crypto on ramps as exchanges are under regulatory oversight especially in Japan and as part of their requirements, KYC and other forms must be filled before transactions are given the go ahead. Even still, when you are on the mainnet your activities can be tracked via heuristics and clustering analysis cracking out exchanges, mixers, and other blockchain services in use.

 

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