Right after the financial crisis of 2008, bitcoin first rose to prominence. With trust in fiat currencies shook, people started looking for alternatives, and this was exactly what started the evolution of cryptocurrencies.
Bitcoin is the largest cryptocurrency in the world right now in terms of market capitalization. It has formed a global network where people can participate and send bitcoins to others in a trustless and transparent blockchain-based system. But despite the possibilities that it offers, bitcoin hasn’t gained much acceptance on an official level. Why? The answer, decentralization.
The framework of operation that bitcoin provides is decentralized with no central authority in charge. Users of the network are put in control and hence transactions across the world can be made without the intervention of third-parties.
As governments have control over the currencies of their respective currencies, the emergence of a global system that takes the government interference out of the equation is certainly threatening for the ruling elite of a country.
Besides going out of control owing to the decentralization aspect of the blockchain, the technology that lies at the core of the bitcoin framework, there are other issues as well that stop this asset from getting official acceptance. These issues revolve around the aspect of bitcoin getting used for carrying out illegal activities in a country. Due to the partial anonymity provided by the bitcoin network, it can become difficult for the government to track down the malicious parties involved. If there are certain ways by which the governments can track the origins of the criminal activities, this issue can be eliminated completely.
Besides being used for illegal activities, cryptocurrencies are also very unstable. There is also the presence of manipulators which often pivot the direction of the market in order to gain benefits. Price fluctuations in the crypto world are extreme. One day the price of bitcoin is seen going up with major greens, while the next day, it is back on its knees with the entire market crashed.
Issues linked with volatility, liquidity, custody etc. also play a role in marring the reputation of the crypto market. Such issues are also the reasons why an exchange-traded fund (ETF) has not approved by the United States Securities and Exchange Commission (SEC) as of now.
All in all, the governments have every right to fear bitcoin. One, it puts them out of the equation in the global financial framework, two, there are issues associated with it that certainly do not make it trustworthy enough for the governments and the investors.