Ever since Bitcoin was released to the world in 2009, governments have been struggling to catch up. Lagging behind in technological understanding, regulation and security, many of these governments had made moves to minimize the potential of crypto or demonize the usage of digital currency.
As it becomes increasingly apparent that cryptocurrency is here to stay and can no longer be stopped, many governments are taking a new approach. The new strategy is to adopt, co-opt or replace existing cryptocurrency.
Here are examples of each method.
Adoption: Japan makes Bitcoin legal tender with over 260,000 stores accepting Bitcoin. Japan has become a testing ground for many new technologies, especially when it comes to e-commerce and FinTech. The country has been way ahead of the United States when it comes to smart card and mobile payment services. It comes as no surprise that they would be one of the first nations to make Bitcoin legal tender. This approach is very appealing because it allows a smooth transition to an already well established and supported cryptocurrency. I would not be surprised if there are clandestine moves by certain governments to slowly accumulate reserves of cryptocurrency.
Co-option: Banks fund and back projects which they deem as more “controllable”, not posing a threat to their financial hegemony. Two coins I believe fall into this category are Ripple and Tezos. This method is the most insidious because it is a trojan horse technique. Certain undesirable attributes are attached to these tokens and then they are passed off as cryptocurrency, while lacking many of the features that are desperately needed in the monetary system ie no central control, privacy and no connections to current financial power brokers. Many large banks have also tried to develop their own currencies that allow them to maintain central control, which leads us to our next method.
Replacement: China Becomes First Country in the World to Test a National Cryptocurrency.
“China's central bank has developed its own cryptocurrency, which is now being tested. Cryptocurrencies have the potential to not only benefit China, but the rest of the world, due to their basis in blockchain.”
This is similar to the co-opt method in that cryptos are being sold as beneficial because of their “basis in blockchain” even though central banks are stripping the privacy features from the tokens.
“Yao writes that the currency would only use a distributed ledger in a limited way. A blockchain might not be used to process transactions, as this could prove an insurmountable bottleneck for a currency with such a huge transaction volume as the renminbi. But such a distributed ledger might be used to periodically check who owns what. “The ownership of digital currency can be verified directly by the issuing bank, so as to realize peer-to-peer cash transaction[s],”.
Luckily most people have come to be cynical of central bank intervention, making this less of a threat than the co-pt method. That being said, attempts by central banks to develop their own national cryptocurrencies will not stop anytime soon.
“China’s central bank — the People’s Bank of China — has developed a prototype of a cryptocurrency that could end up in circulation in the near future. It would be introduced alongside China’s primary currency the renminbi (also called the yuan). China will be simulating possible scenarios and running mock transactions using the cryptocurrency with some commercial Chinese banks.”
China may be leading the way but other nations are not far behind. The Deputy of Russia’s central bank has emphatically stated that “regulators of all countries agree that it’s time to develop national cryptocurrencies.” Recently Putin met the founder of Ethereum Vitalik Buterin and endorsed the digital currency.
Conclusion:
Cryptocurrency is here to stay!
Government central banks and private banks will continue to use all three of the aforementioned approaches to cryptocurrency, adoption, co-option and replacement.
Replacement and co-option remain the most dangerous methods as they seek to undermine the fundamental attributes of privacy, accountability and transparency.
Adoption is the most desirable method because it allows for open source, truly decentralized and consumer chosen solutions ie bitcoin.
I would personally like to see both bitcoin and litecoin given “legal tender” status. Bitcoin could be used as a token of reserve or large settlement vehicle,while litecoin would be used for daily transactions. I am partial to this solution because both networks are well tested and have great communities and infrastructure behind them. The two tokens are extremely similar and if BTC implements SegWit they could both institute Lightning Network and eventually Atomic swaps, allowing for cross blockchain transfers without the need for a third-party service. Bitcoin would need to quickly and effectively solve its scaling problem for this to be feasible.
This is not the only solution and would not have to be the be all and end all. Potentially adding a third currency as legal tender could allow for a more diverse and robust ecosystem. Graphene technology is extremely exciting and powerful. The fast and free transactions make for a compelling argument as a currency.
I do not know exactly what the future holds but I do know that governments and banks will continue to try and control it. Be discerning in your investments and crypto advocacy. Humanity is in dire need of a transition into an honest monetary system and we cannot afford to get this transition wrong.
Sources
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Well said!
This was an enjoyable read. I was not aware that China was looking to create their own crypto. It makes sense that they would since they also purchase so much gold. They are preparing for life after the dollar collapse.
Great piece my friend!
Thank you!
It will be interesting to watch. I think we could witness monetary musical chairs. The first country to make the switch of their currency (Could be gold backed, or crypto etc..) Will "sit down" first and be safe, while the rest of the world scrambles to compete/ catch up and transition before time runs out and the old system is useless.
Musical chairs is a good way to put it, haha.
I agree. Our time to act is now and secure positions in our portfolios. Once the switch happens to a new system we will ride the wave.
Amen to that.
Thanks for sharing, i've following you... Crypto currencies will get recognition in due time by government we can all see how its been growing up rapid....
Thanks! Government will be forced to deal with them.
....and the Transaction Speed for that coins are sooo Long, that you have to pay many tax for external Services or you have to wait many minutes until the Transaction is confirmed. Try to open the eayse for the congurences. @SVtechnik are some good articles about the Background Problems
LTC is pretty fast and getting faster. BTC has major issues that need to be sorted out for sure. I have stopped using BTC for transactions, just way too slow and expensive. Thank you for reading and commenting!
Very interesting and insightful! Thank you for the post! \o/
Thanks, I am glad you enjoyed it!
Cryptocurrencies will get recognition from governments in the near future. India also thinking to legalize btc.
Yes several countries looking into it atm.
They can try to reject cryptos but they will have no choice but to accept them. Cryptos are the future of money, internet and technology. Thanks for sharing resteeming and following you
Thanks for the resteem and follow. thanks for reading and commenting!
Japan's strong and early embrace of Bitcoin and the name Satoshi Nakamoto makes me think that secretly they were behind the genesis of Bitcoin as their master plan to defeat the US dollar and make the Japanese Yen one of the world's main currencies...
/conspiracy
That is an interesting theory or....The US developed the plan, knowing they could test it in Japan, as they have with several things since ww2. If it fails, blame Japan lol.
I love reading ppls satoshis theories