Bitcoin, Blockchain & Cryptocurrency News

bitcoin Bitcoin
ethereum Ethereum
ripple XRP
Show details

Bitcoin to the Rescue, Money Amid Economic Chaos

Reading Time: 3 minutes by on January 22, 2017 Bitcoin, Commentary, News

People in the mainstream segment of the United States have, by now, at least heard about Bitcoin. But many still hold reservations about the digital currency and its legality, since the US government has not explicitly given its verdict. Even without government permission, bitcoin, the currency, and its decentralized nature do not give away a single point of failure for an entity to assert control. So how does one attempt to control a structurally nebulous thing?

“The more you have currency crises, the more you have manipulated currencies, the more you have currency controls, the more you have inflation, the more you have recessions, the more of a problem Bitcoin is going to be for these governments – and they’re going to relentlessly hammer at the one thing that they can control, which is the exchanges.”

On November 30, 2016, the Department of Justice granted the IRS permission to subpoena Coinbase for the identities of its user base. Coinbase has hit back with an alternative arrangement that does not uncover user identities but whether the judiciary authorities will come around to their request is questionable. But over time, we may see more – not less – of these instances, making it increasingly prohibitive to convert between fiat and bitcoin.

As governments make a practice of propping veritable hoops onto the exchanges, which serve as the portals to bitcoin, they will force users to choose between that or their state-controlled currency. On episode #321 of the Let’s Talk Bitcoin podcast, guest speaker Andreas Antonopoulos prophesied that Bitcoin would mature into a closed economy precisely because of the actions of the government:

“By pushing to make it harder and harder to get in and out of bitcoin, they’re not going to stop people from getting into bitcoin; they’re going to stop people from getting out of bitcoin. And then they’re going to push more and more people into bitcoin.”

In regulating bitcoin, the United States government treats it as a commodity, deliberately making tax reporting on capital gains and losses an administrative nightmare. In countries that apply VAT to bitcoin, the hassle of making everyday bitcoin transactions discourages its use as a currency. In other nations, like that of Venezuela and India, however, holding savings in bitcoin is a matter of life or death. Thus, people will be pushed to bitcoin and will then remain in bitcoin if two conditions apply: Firstly if there is a destabilized national currency, and secondly a heavy regulatory environment that makes it difficult to get in and out of bitcoin.

Venezuela’s economy, in the midst of hyperinflation, is one of several dominoes to fall as a result of governments injecting chronically weak economies with the palliative of money printed from the air. Direr than the need for capital flight, a minority of Venezuelans are trading bolivars – which are rapidly depreciating by the day – into bitcoin in order just to buy food and healthcare necessities. On the demonetization front, namely in India, where the resultant death toll reached 55 in a matter of days, bitcoin adoption via Indian trading platforms nearly doubled.

It is ironic that the very fears about Bitcoin that people worry about now – government prohibition and currency control – will be the very factors that drive people into bitcoin later as the War on Cash and global currency crises start to unravel. To quote Antonopoulos, who revealed to London Real he has managed to get his mother to utilize bitcoin as part of a robust pension plan in response to the unforgiving banking crisis in Greece:

“Money will always flow from the high-friction system to the low-friction system, from the high-difficulty, high-cost system to the low-cost system – it will always flow downhill.”

Like BTCMANAGER? Send us a tip!
Our Bitcoin Address: 3AbQrAyRsdM5NX5BQh8qWYePEpGjCYLCy4
Join our telegram channel