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Bitcoin has staunch supporters within crypto circles. It also has its critics, for the cryptocurrency seems to have become a victim of several controversies. Even governments across the world have begun to view Bitcoin with a jaundiced eye! They are worried about the effect that Bitcoin may have on their respective economies. Find out more about bitcoin through their official website at cryptolina.com/ to help you understand the concept better.
It is a Non-regulated Cryptocurrency
Bitcoin made an entry into the virtual world years ago. Yet, no government has been able to figure out how to regulate Bitcoin.
It is because the coin’s utility seems to be so confusing! People wonder if it is only great for day-to-day transactions? They also question if its major value lies in the investment arena. Then again, they are not sure if Bitcoin will be useful and safe to use during a local/global economic crisis.
Even the most experienced of traders/investors, is unable to provide satisfactory replies to these queries. Therefore, no government agency is ready to come forward for defining lawmaking for Bitcoin, or to find the appropriate approach to formulate laws. No one wishes to take the risk of overseeing Bitcoin’s operations!
True, Bitcoin does come into play for investments in Futures, a well-known product. However, the cryptocurrency exchanges handling these transactions, are themselves, unregulated. The Securities and Exchange Commission (SEO) has not given licenses to enable transactions for the Futures marketplaces.
Government-Imposed Controls have No Effect on Bitcoin
Increasing exports can bring down the value of a product within the confines of the concerned country. Therefore, the central authorities initiate capital controls over excessive exports.
Many view this as governments exerting control over the concerned nation’s fiscal and economic policies. Since they wish to oppose this move, they take resort to Bitcoins.
Transfers and exchanges take place over the Internet, which is not confined by boundaries. Therefore, investors and traders export their Bitcoin wealth wherever they want to, thereby outmaneuvering capital controls.
A recent example is China, as reported by the crypto forensics company, Chainalysis. The Chinese have access to an annual purchase of $50,000 in foreign currency. However, those possessing Bitcoin wallets (based in China), managed to send $50 billion in Bitcoins to several other geographical locations, in 2020. They converted local currency to cryptocurrency, and managed to be successful.
Criminals Have a Field Day with Bitcoin
Criminals across the globe require funds for initiating large-scale illegal activities. Therefore, the advent of cryptocurrencies, especially Bitcoin, is a boon for them!
Any activity concerning digital currencies takes place in a virtual world. Hence, it remains anonymous. Investors/traders leave only their respective addresses on display. The network/blockchain has no record of individual/organizational identities, which may be connected to these addresses. There is no way of finding out if these addresses are true or false, either.
Bitcoin’s network provides an algorithm that trusts everyone. Therefore, one never knows if the sender and the receiver are trustworthy or not. An example is the case involving a marketplace called Silk Road. People could purchase illegal drugs and guns with the aid of Bitcoins. Whenever a purchaser ordered a shipment of goods, the receiver of the payment would have it placed in escrow. The release of funds took place, only after the purchaser confirmed that the shipment had reached its destination. The operations ended, after the FBI managed to trace it and seize the illegal goods.
Similarly, hackers use ransomware to frighten Bitcoin holders into parting with their money. A famous case is the Colonial Pipeline hack, which took place in 2021. Various U.S. states suffered from disruptions in energy supply.
Bitcoin Operates on a Decentralized System
Only a sender and receiver are involved in any financial transaction. There is no need for a third-party or intermediary. Even the concerned government’s control system cannot interfere. Therefore, such transactions raise the question of ‘trust’.
There is no necessity for having a central Bitcoin bank in place. Anyone, who can handle a full node, may produce the cryptocurrency. There is no way of figuring out who is managing the digital currency, or distributing it.
Similarly, only when all the full nodes agree to it, may the record of a financial transaction go into the central ledger. In case, there is any kind of disagreement or mistake, the transaction remains unrecorded.
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