Published on October 22nd, 2022
What’s fascinating about bitcoin is its potential as a medium of exchange that competes with government fiat currencies yet is not backed by any asset or commodity underneath it. You can visit platforms on this site to get 100% control over your money while trading in bitcoin. In the process, it has become a tool for political dissidents and a medium of exchange. Bitcoin’s appeal is not merely technological and anarchic.
It also stems from the perceived weakness of fiat currency systems, which have become state tools. Unlike gold and dollars, bitcoin is not backed by government guarantees or central bank promises. Instead, it is a pure medium of exchange that volunteers can use and accept.
Is the U.S. aware of bitcoins’ potential as an alternative currency? Does the U.S. government want to take control of bitcoin before it gets out of hand?
The irony is that, as the economy worsens and people continue to lose faith in their currencies, the governments will attempt (with legal tender laws) to force people back into using their failing currencies. At that point, if there are other viable alternatives like bitcoin, people can easily peel off from their failing fiat currency and adopt a better alternative in no time.
According to experts, bitcoin’s growing popularity has spurred the U.S. government to take a closer look at it. And it’s not only the U.S. government interested in getting its hands on bitcoin. Even the Central Bank of Libya is looking into why the people there have started embracing this new digital currency.
The United States classified bitcoin as a commodity.
As the U.S. government is seeking to work out how to regulate bitcoin, they are doing so with the same mindset they apply to all commodities. But the U.S. government doesn’t seem clear on what this digital currency is regarding bitcoin. As a result, the U.S. Commodity Futures Trading Commission (CFTC) has placed bitcoin on a list of commodities for studying.
The Federal Reserve, which regulates banks and securities firms, has discussed whether bitcoins should be classified as money service businesses or commodities. Bitcoin exchanges are also regulated by both agencies and ranked under the money service business category. With this in mind, it’s no wonder that both regulators and lawmakers have started looking at ways to counter this new potential competitor for the dollar.
Bitcoin Undermines the Cycle of Trust
It is because bitcoins do not stem from the U.S. central bank, and no Federal Reserve or national banking authority backs them up. In this way, bitcoin undermines the cycle of trust that the entire global financial system relies on. And it’s not just the government or banks who will lose power if bitcoin is widely adopted. Retailers, centralized payment processors, and credit card companies also see their profits drop with every bitcoin transaction.
It creates a situation where many interest groups with deep pockets are opposed to the success of bitcoins. What’s more, bitcoin’s open-source technology makes it vulnerable to hackers. And as per government concerns, the currency continues to grow, and there are fears that it will be increasingly easy for criminals to exploit or even shut down the network altogether. Thus, even though thefts and scams happen in the traditional banking system, they do not have nearly as much impact as they would in a world where bitcoin is prevalent.
What Can The U.S. Government Do To Counter Bitcoin?
A new kind of digital dollar
Such a currency could be a boon during times of financial crisis. It could also help reduce the demand for bitcoins and other digital currencies, especially if it’s easy for people to convert their dollars into the new digital form.
A digital version of the dollar would be far more accessible for law enforcement to trace and monitor, which is precisely what many people are worried about. Unfortunately, the government has been reluctant to create alternative forms of money competing with the dollar. For now, the U.S. is keen to regulate digital currencies and ensure that it does not become a threat.
The government’s long-standing resistance to bitcoin is understandable. A digital dollar would be more likely to fight economic disruption than bitcoin as an alternative currency. For centuries, the dollar has been the bedrock of trust in the financial system. On the other hand, Bitcoin is more of a new currency that experiments with different concepts. It’s also important to remember that bitcoin enjoys greater privacy than traditional banking systems because all financial transactions are stored on computers across the globe and not centralized in one or two institutions, which you see with fiat currencies.
Safeguarding financial stability
Several stablecoins have come to market today, and banks and regulators are more interested in these digital currencies than ever. In addition, some investors see stablecoins as a trading tool that could help support a broader cryptocurrency market.
In addition, the Federal Reserve has examined whether stablecoins can serve as an alternative monetary policy tool, although regulators have generally steered clear of the area. Currently, the United States has mixed reviews about bitcoin, but it will not become a legal tender in the nation.
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