An academic paper, also called the white paper, that was released on 31st October, named Bitcoin, by an unknown person named Satoshi Nakamoto laid the groundwork on which the entire decentralized world is today based upon. This white paper described a system that could enable trustless transaction between two peers without the intrusion of a third party commonly referred to as the middleman. This means of carrying out monetary transactions was more secure, tamper proof and reliable, which was essentially an improvement to the older centralized systems. Bitcoin Network has become larger since then and is thriving today.
Originally, Bitcoin was supposed to be a currency, to be for everyday monetary transactions, but that has not been the case. The price hike of 2017, made Bitcoin stand out as a great investment tool. But cryptocurrencies are nowhere near being adopted in place of Fiat. That brings us to the question what is essentially holding them back?
In 2014, the IRS classified Bitcoin as property rather than currency. Like property, cryptocurrency can be held onto while it appreciates in value. But similar to centralized currencies, it can also be used to hold and exchange value. There is however no regulatory framework present to regulate them as of now.
Recently BlockPublisher got in touch with Lizzie Parmenter, the Consultant for Pelicoin, the Gulf South’s largest cryptocurrency ATM network. She told:
This misclassification of cryptocurrency is a stumbling block to building effective regulatory frameworks that will facilitate mass adoption. Like the internet at the dawn of the digital age, cryptocurrency demands a completely new classification in order to be properly regulated. Because the capabilities of cryptocurrency and blockchain technology are so vast, it’s not possible to accurately sort them into any pre-existing regulatory categories.
In addition to being unable to get sorted into a pre existing category of regulation, the governments have been reluctant to provide regulation. Some have outrightly banned the use of cryptocurrencies which includes Russia, China, and Thailand. These countries have banned the use of cryptocurrencies and made all associated activity illegal. The centralized systems put the control of national and global economies into the hands of governments. She also told how this reluctance is related to governments being unable to exercise any control on a system that would have no central authority. Lizzie added:
Fiat currencies, like the dollar, are backed and controlled by central banks. Central banks exert economic influence via monetary policy. Using fiscal policies, governments can track the movement of currency, tax that movement, and decide who will profit. Through central banks, governments can also dictate how much currency is in circulation, which translates into the power to stimulate or depress national and global economies.
Lizzie also laid emphasis on the fact that if decentralized currencies could replace the fiat, that would ultimately diminish the need for banks and centralized institutions. She concluded by saying:
Mass adoption of cryptocurrency could destroy the authority of central banks, and render the banking system at large obsolete. This is the primary reason that governments are reluctant to provide a regulatory framework that would encourage mass cryptocurrency adoption.