Bitcoin is the first peer-to-peer payment network that involves no central authority or middlemen. It is completely powered by the people who use it. Bitcoin is a very powerful cryptocurrency. It has the leading market capitalization. The government has a little fear of cryptocurrencies due to the lack of presence of a trusted central authority heading the cryptocurrency. The government issues conventional currencies which are mainly called “FIAT”. The government controls the fiat currencies entirely.
There are certain factors that affect this link between Bitcoin and the government. Some of them are:
1. The fiat currencies are made up by the government. They can be issued and destroyed by the government on the basis of monetary policy. This is done to exert economic influence. The currency movement can be tracked and criminal activities can be easily traced. On the other hand, bitcoin is made over the network. Any existing banking system is not at all required for bitcoin. This is why the bitcoin is lease affected by the government.
2. If bitcoin or any other cryptocurrency is thoroughly used, the existence of a banking system becomes completely irrelevant. Thus, it is believed that the cryptocurrency can easily take over the banking system which makes the government a little afraid about the existence of cryptocurrencies.
3. The fact that the governmental policies cannot be imposed on bitcoin is mainly due to certain reasons. The main reason being the bitcoin is built over cyberspace. It has no physical significance. It is not like gold or any other monetary good. It is a computer-based currency. The digital nature of bitcoin invites risk from hackers and malware.
4. The government does not trust the cryptocurrency since it is not a secure medium of transaction. Therefore, none of the policies of government apply on bitcoin.
5. Bitcoin is not the best way of investment. It was never designed to be the normal equity investment. Moreover, since 10 years of creation, bitcoin is still in the developmental phase. This gives less credibility for the users and the government. Bitcoin has a very high risk of investment. It can be easily used in black market transactions, money laundering, illegal activities, and tax evasion. Sometimes, fake bitcoins can be easily sold which makes fraud cases very smooth going.
There are a lot of reasons why Bitcoin has this different connection with the government. The government does not control Bitcoin. There are a lot of things that keep Bitcoin from being affected by any government policy, as listed above. Bitcoin is completely an independent Cryptocurrency.
