Cryptocurrencies are the most trending topic among technologists, entrepreneurs, and investors. Thanks to the innovative technology blockchain, for allowing users to make transactions through a decentralized network. Due to this feature, cryptocurrencies have become the primary medium of a fundraising system for many startups.
Well, these startups are focusing on creating innovative applications, programs, and solutions for different purposes. For example, IBM is providing blockchain-based solutions to its clients in exchange for cryptocurrencies. But the government of several countries has banned cryptocurrencies for different reasons. The main reason is money laundering and fraud.
However, the government of some countries wants to impose rules to control digital currencies instead of banning them. Here are the main reasons why governments in regulating the usage of cryptocurrencies.
Reasons for Regulating Digital Currencies
There are various reasons for which the government wants to regulate digital currencies. Below are some major reasons that the government of many countries is trying to control digital currencies.
1. To Stop Money Laundering and Fraud
If you go back to the history of digital currencies, you will find that many people had lost their money in the crypto market. Digital currencies have come into existence in 2008, and the first digital coin is bitcoin. In the initial years, people couldn't understand what is the usage and concept behind digital currencies. So cybercriminals used this as a way to loot money from the public by showing them great investment opportunities.
Due to the decentralized nature of cryptocurrencies, it is hard to find the identity of the person involved in the financial transactions. There are different ways to take away money from the public. Some of the ways that fraudsters use to deceive money from the public are by providing a fake trading exchange platform trough a fake ICO announcement, digital wallets. etc.
In 2011, Mt. Gox- a bitcoin trading exchange was ceased for conducting fraud activities and money laundering. To stop such activities the government wants to take preventive measures to save the money of the public.
2. To Prevent Illegal Activities
As cryptocurrencies allow the anonymous feature, smugglers, drug suppliers, gamblers use it for payments. To prevent such illegal activities, the government wants to regulate cryptocurrencies. If you are for a long time in the crypto space you must have heard about the Silk Road Scam. This scam was shut down in 2013, it was used for money laundering as well as for the trade of drugs, weapons, harmful chemicals, etc.
This platform was used for making illegal activities and the transactions were made through bitcoin. Over $200 million bitcoin transactions were done through the platform.
3. To Stop Terrorism
It was found that terrorist organizations are also involved in cryptocurrencies for financial transactions. As cryptocurrencies allow to make cross-border transactions without the permission of the government, they use it for payments.
4. To Provide a Trustworthy Infrastructure to the Citizens
Even though cryptocurrencies provide many benefits such as privacy, easy, faster, and cost-effective financial transactions, people can't trust the system as it is deregulated. There is a fear among users that the system could be used for manipulation and they may lose their money. As people trust the government, so they will believe more in the system that is approved by the government. So, the government with financial transactions collaboratively wants to provide a trustworthy infrastructure to the public. Follow click money-system, if you want to invest in cryptocurrencies.
5. To Gain Authority Over the Cryptocurrencies
Cryptocurrencies operate through blockchain technology which neither allow the government nor any financial institutions for approving financial transactions. As a result, the government is losing its authority over financial transactions. Again, central banks also losing their customers because of the demand for cryptocurrencies. Hence the government wants to regulate the cryptocurrencies so that it can gain its authority.
Final Words
The government wants to regulate digital currencies for the above reasons. Some countries have completely banned the usage of bitcoin and other cryptocurrencies. However, banning the usage of cryptocurrencies is not a good solution.
No doubt, the government should impose rules for such fraudulent activities to safeguard the money of citizens. Now, what do you think about the actions of government regarding the cryptocurrencies? Please share your opinion and if you have any queries ask in the comment section.
* This is a contributed article and this content does not necessarily represent the views of sciencetimes.com
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