Should the US government classify Bitcoin as a legal currency?

Bitcoin, the pioneer electronic cash claims to be a decentralized peer-to-peer payment network that does not need central authority or third parties such as banks to carry out transactions. The fact that it eliminates that role of government and central banks in the creation and circulation of money with a given jurisdiction hinders its acceptability as a legal tender. The US government has been reluctant to legalize bitcoin and other cryptocurrencies over the fiat (U.S dollar) due to fear of uncertainties associated with virtual currency. 

The persons that support Bitcoin holds that it’s a universal currency that is liberal from unnecessary regulations. Conversely, the authorities who are mostly against it see it as a threat to fiat currency with its potential to snatch away its economic powers. With these thoughts at in mind, the US government has in many instances wanted to ban bitcoin and it associated cryptos without success.  Thus, the US government does little if any effort that can make bitcoin a legal currency.  

Based on my understanding, no government is under an obligation to declare or adopt bitcoin as an official currency. Even though some countries such as Japan, Malta, Canada among others accept bitcoin as a legal tender, however, I don’t believe the US can easily accept the same. Having in mind that the US government mint the dollar which is partially controlled by the Federal Reserve. In this scenario, bitcoin is perceived as a competitor to the dollar, which serves as the world’s reserve currency as well as the main source of America’s soft power. To declare bitcoin as a legal currency will undermine the dollar privileges unless there are compelling reasons the U.S government will never spearhead the idea of legalizing bitcoin or any other equivalent cryptocurrency.

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What to know about bitcoin in a nutshell?

  • Bitcoin is about a decade old, but it has gained enormous popularity among ordinary peoples as well as the governments in the entire world.
  • Bitcoin is perceived by most government organs in the world as a tool that can be used to circumvent capital controls, to carry out money laundering and other illegal purchases.
  • Financial experts have raised systemic concerned over the decentralized nature of cryptocurrency to destabilize the control of central banks in printing and circulating fiat money.
  • Bitcoin is electronic cash that is not bounded to any sovereign borders but rather self-regulated through a blockchain system.

Reasons why the US Government is reluctant in declaring Bitcoin Legal currency

  1. Tax evasion

Taxation is a major source of revenue to any functioning government. Cryptocurrency, on the other hand, hinders tax collection from citizen because it’s anonymity transactions. The crypto transactions are untraceable; thus, many businesses will take advantage to evade tax that government need to meet its expenditure. Also, the cryptocurrency system is unregulated by a bank meaning it will be difficult to account for the number of revenues a business makes thus difficult to impose a tax on any person or business. The same scenario of possible tax evasion when paying income to workers with crypto or sending crypto to other countries. Thus, the US government would not like to risk legalize bitcoin without clear measure on how to collect tax from it. 

2. Crime Concerns

Many cybercrime issues have been raised in the past regarding virtual currency. Talk about bitcoin hackers, money laundering, terrorist funding, drug trafficking, and other illegal and subversive activity all have been associated with bitcoin in the past. Since the transactions remain untraceable, criminals prefer bitcoin as a means of payment to avoid the long arm of the government.  For instance, the defunct Silk Road online drug market is becoming a treat as its since payments are done in bitcoin making it difficult to catch up with the culprits. The U.S government fears that declaring bitcoin and it associates as legal currency criminals are likely to take advantage to further criminal actions.  

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3. Control issues

Most government organ in the world have total control over the fiat currencies. They can use the central bank as an instrument to issue or destroy money using to so-called monetary policies, in a way they manage to exert economic influence. With fiat, it is possible to dictate those that can benefit from the movement and easily collects taxes. All this control will diminish away in case bitcoin is upheld as a legal currency because it is non-government bodies, they will be creating the currency. 

The Other Side of the Bitcoin

Despite the limitation that hinders bitcoin progress in becoming official legal tender, there are coherent reasons that justify why it ought to be legalized. The legitimate theory in favour of cryptocurrency is based on the fact that “the central bank tinkering with the money supply has induced recessions, exacerbated unemployment, and given rise to a global banking system based on profiteering and corruption”.

At a glance, one may imagine the central bank to be good and trustworthy maybe because it seems to control inflation to stimulate economic growth or strengthen the banking system. However, this is not always the case, particularly due to political influence, most CBs are not independent but work hand in hand with the ruling political class. In most countries including the U.S, the CBs are not independent because the head of the central bank is appointed by the head of state (an elected leader), thus in most instance, they are compromised to set fiscal policies that align with the government’s desires for them to keep their jobs.

I believe the central bank have too much power that they always abuse it through economic manipulation. Despite other citizen having to work hard to earn money. There are the case where the central bank has been accused of printing money out of thin air, then puts some checks and balances to keep a countries economy afloat. Cryptocurrency is aimed at addressing all this misconduct of most central banks in the world. By legalizing bitcoin, it will be a step forward to return the power of controlling money back to the people instead of entrusting the responsibility to a few individuals that takes advantage of it.

In summary, cryptocurrency has much good to offer if today it is declared a legal tender by any government including the U.S. However, the government should be prepared to find measures such as the smart contract to regulate bitcoin upon legalization.

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