Why do some states resist digital assets?

Thanks to the Internet, a wide variety of innovations have been created since its advent. One of such is the creation of cryptocurrency. It is an effective medium of exchange that can be used to buy products and services both online and offline.

Two main features of cryptocurrencies are security and anonymity. Furthermore, they are recorded in a public ledger known as the Blockchain. These records cannot be changed unless specific terms are achieved. Due to these characteristics, cryptocurrencies have been adopted with enthusiasm by the public. However, some countries have not legalized digital assets as it transfers financial power from them to the hands of the individual. Read on to discover more about why they resist and what can be done about it.

Why are they resisting cryptocurrency?

1.    Lack of a uniform regulation structure

Many states do not have a consistent structure for regulating cryptocurrencies. This makes them wary of supporting investment in virtual currencies.

2.    The transfer of economic control

Traditionally, transactions were handled by banks and other financial institutions. They charge a fee for every financial transaction such as for withdrawing money, holding deposits and related aspects. They’re the main middleman in trade, hence hold all the economic power.

Cryptocurrencies transfer the same power from the banks to the hands of the people. They allow individuals to make transactions with each other directly without any need for a middleman. The fees are low; there is absolutely no risk of fraud due to the decentralized ledger. Therefore, they offer a more fluid, private and affordable way of value transfer than any other financial institution.

By wielding this potential, banks and their owners have traditionally held massive political power, and the unique nature of cryptocurrencies have caused a threat to this very nature. This results in countries banning or issuing warnings against dealing with digital assets. If the members of the public adopt and accept cryptocurrency, they can eventually make banks and financial institutions obsolete.

3.    The disempowerment of the government's monetary policy

Every government enacts monetary policy. This is a directive that is used to exert influence in the economy and is executed by the central bank. Monetary policy relies on elements such as interest rates, selling government bonds and dictating the sizes of cash reserves.

By wielding this power, state administrations can determine the transfer of fiat currencies, track their movement, identify who exactly profits from this motion and even collect taxes. Cryptocurrencies take all this power away and transfer it to the individual traders. As such, states resist digital assets to retain economic power.

How to deal with this resistance?

Cryptocurrencies are here to stay. While banks and states have resisted them in the past, accepting virtual currencies has a valuable, practical benefit. By embracing cryptocurrencies, we can transform our economies at the state, national and even global level.