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Why Are Some Countries Banning Bitcoin?

13 January 2022 14:00, UTC

While Bitcoin has swiftly risen to become the world's most prominent and profitable crypto, some government regulators have also intensified campaigns to ban its usage within their jurisdictions. China is one of the most notable culprits, aggressively cracking down on crypto businesses since 2017. Other countries that have also passed laws banning cryptocurrencies include Algeria, Iran, Colombia, Bolivia, Iran, and India. So, why are some countries banning Bitcoin? The following article answers that question.

Crypto Facilitates Criminal Activities

The countries that have banned Bitcoin and other cryptocurrencies give various reasons for their actions. However, most of them have raised growing concerns that Bitcoin and other cryptocurrencies facilitate criminal activities, including money laundering, drug trafficking, terrorism funding, and fraud.

The critics claim that Bitcoin allows people to transact anonymously, making it extremely difficult for the regulatory authorities to monitor the movement of funds. Unlike in the traditional financial systems whereby the parties to a transaction must reveal their identities, Bitcoin transactions are not subject to the KYC rules.

Bitcoin users mainly identify themselves through public addresses that do not reveal their real-world identities. Thus, Bitcoin seems like a more reliable currency for criminals to launder money, traffic drugs, and commit more illegal activities without detection. However, there are also numerous ways and technologies for tracking Bitcoin transactions.

Bitcoin Undermines Government Authority

Fiat currencies have enjoyed a calm legal environment for many decades mainly because their supply is subject to government regulations. On the other hand, Bitcoin presents a significant threat to that authority because it is decentralized. Some governments fear Bitcoin encourages an uprising, undermining their control over financial transactions.

Thus, allowing its usage would potentially hinder the government's grip on financial systems. According to critics, Bitcoin could spark an all-out resistance to other government policies beyond the economic spheres. They view Bitcoin's decentralization as a serious attempt to undermine the rule of law. Hence, governments should abolish it.

Bitcoin is a Speculative Asset

Some governments are also unhappy with Bitcoin's constant price fluctuations, exposing investors to severe risks. Like other cryptocurrencies, Bitcoin's value mainly relies on public perceptions expressed by the media. Positive comments usually heighten Bitcoin's demand and prices, while negative comments hinder its growth and value.

Many investors view Bitcoin's volatility as a threat to profitability since it hinders their ability to predict its price movements. However, seasoned investors also know some strategies to leverage Bitcoin's volatility for profitability.

For instance, the ethereum-trader.app of leading crypto exchanges provides consistent and comprehensive analytical tools and charts to enable traders to maximize their returns. Investors can use those resources to understand the market conditions and determine the best times to buy and sell Bitcoin for significant gains.

Bitcoin Could Destabilize Local Currencies

Bitcoin thrives in an unregulated market and is not subject to government or institutional influence. As such, some regulators are concerned there is no one to act even when it threatens the economy. Besides, Bitcoin has no ties to any physical commodity that could harmonize its prices if things take a drastic turn.

Bitcoin's massive price swings induce instability in the market, threatening local currencies' purchasing power. Its constantly growing prices make it seem like a more attractive payment method and an asset to investors, businesses, and individuals than fiat money. Thus, some governments fear allowing Bitcoin would significantly destabilize their currencies.

Overall, various reasons exist for some governments' decisions to ban Bitcoin. However, it is still unclear whether those decisions will stand the test of time since the bans don't prohibit businesses and individuals from trading or holding Bitcoin.