Bitcoin is often touted to be the future of currency. As the world keeps progressing and we keep moving into the digital realm, we can expect money to take its new avatar as well. It is a very convenient method of conducting online deals like this trading app. At the same time, there is also plenty of suspicion around this new form of currency.
And this suspicion mostly arises from two institutions – the bank and the government. They have been very vocal about denouncing the use of this new mode of currency over physical currency. The reasons that they provide are also very legitimate concerns about this new form of money. Let’s discuss them.
Reasons provided by banks
Convenient for money laundering:
Banks oppose bitcoin because it is one of the most convenient means of money laundering. The use of bitcoin can be very effective when it comes to hiding the origin of this laundered money. More importantly it can be used to covert large deposits into a few Bitcoins and no one will ever know. Banks are usually apprehensive of such transactions and want to stay clean. As a result, they advise their customers that the application of Bitcoin is usually not in their best interests at all.
Low profits for banks:
When you keep a lot of money in your bank account, it makes a huge amount of profit overnight. However, when you transfer that money in to bitcoin, the resulting in your bank account is pretty low. As a result, banks are not able to make the same number of profits as usual. Banks have to keep something called a compliance cost wherein they have to report and investigate this huge amount. This is because the money seems to disappear overnight as it has been converted into Bitcoin.
In continuation with the previous point, Bitcoin makes the banks incur something called a compliance cost. Since the sum of money converted into Bitcoin is usually huge, it is the responsibility of the banks to investigate the origin of this huge amount as well as the account to which it has been transferred. They have to be perfectly sure that this money is clean and is not being used for anti-social purposes. All of this extremely time-consuming and requires a lot of resources from the bank, resources that can otherwise be used for something else.
Hard to investigate the source:
In continuation with the previous point, if a huge a sum of money is converted to Bitcoin, banks have the task of investigating the source of the money. However, it is easier said than done. Once the Bitcoin reaches the eventual recipient, the money becomes untraceable. There is usually very little evidence left behind regarding the source of the money or for that matter the way it was earned.
These four reasons should be sufficient for anyone to not employ Bitcoin for any financial activity. However, if you are not satisfied by the bank version of the story, maybe you should continue reading and find out the government version of the story as well.
Reasons provided by the government
Tendency to be used for crime:
Bitcoin is decentralised and anonymous, which in other words can also mean immunity. As a result, it has become the most preferred way of carrying out every kind of nefarious activity without having to think about being caught. The most common users of Bitcoin happen to be terrorist organisations and drug mafias who find it really easy to smuggle arms and drugs without letting anyone know. It is already difficult for the government to put an end to this and now with the introduction of Bitcoin, it has become even more complicated.
Complicated Fiscal Treatment:
Criminal conspiracy and activity is definitely one of the major reasons that the government is so vehemently against the use of Bitcoin. However, there are plenty more serious reasons behind not using Bitcoin, out of which fiscal treatment is one which often tends to get very complicated. Since Bitcoin is totally decentralised, thanks to the features of its blockchain technology, the government is unable to formulate tax regulations as well as a monetary policy. One of the major features of any monetary policy is the way the taxes are dealt with. With the introduction of Bitcoin, this seems to be fading into the shadow.
Central Banks are not able to do their jobs:
The central bank of a country is one of the most important institutions for the government as it keeps all the records of the day-to-day monetary affairs of the country as well as ensuring the stability of the financial health of the country. In fact, ever since Bitcoin became very popular, many central banks have suffered and that has indirectly caused the government to suffer.
A rather premature concept:
People are still learning about Bitcoin and are yet to understand its unstable and volatile nature. As a result, governments are not very keen on implementing them as of now since it takes time for people to get accustomed to it.