As Bitcoin remains to get new price records, investors are paying more and more focus on it. At the same time, the spreading of cryptocurrencies has actually not gone unnoticed by the world’s governments either. The first reaction has actually been mixed. Some were early to regulate them, with the United States federal government categorizing bitcoin as a convertible decentralized virtual currency in 2013. Others, like Nepal and also Ecuador, have made it illegal. In the majority of countries, nevertheless, cryptocurrencies still exist in a legal vacuum.
Many governments are currently recognizing that cryptocurrencies are not a passing phenomenon but could completely disrupt the globe’s monetary structure. Because of that, they are establishing “national cryptocurrencies” that can progressively change fiat currencies. Here is a quick summary of developments in a selection of countries:
- Russia – In October Russia declared that it will issue the CryptoRuble, which could not be mined as well as which is controlled by the Russian government.
- China – After cracking down on Bitcoin exchanges last September, the Chinese government has actually announced plans to introduce a national cryptocurrency.
- India – The Indian federal government has continuously alerted its population on the volatility risks posed by cryptocurrencies. Despite that, the Reserve Bank of India is apparently studying the introduction of a digital currency to change the rupee in online transactions.
- Singapore – The Monetary Authority of Singapore has actually already implemented the initial stage in tokenizing the Singaporean Dollar utilizing a private Ethereum blockchain.
- Venezuela – On December Fourth Venezuela announced it would soon start to implement the “Petro”, a national cryptocurrency backed by the country’s oil, gold and gas reserves.
- Estonia – Estonia, among the world’s most tech-savvy countries, has recommended launching a nationwide cryptocurrency called the “Estcoin”.
- Kyrgyzstan – Kyrgyzstan, a major gold manufacturer, is planning to launch a gold-backed cryptocurrency called “GoldenRock”.
- Catalonia – Although an indispensable part of Spain, the self-governing area is thinking to introduce its very own digital currency if when it obtains independence. The local government would design it based upon Estonia’s “Estcoin” project.
The advantages of using cryptocurrency rather than fiat money for both individuals as well as governments are several:
Hedging Inflation – With a restricted issuance framework embedded in the blockchain, cryptocurrencies tend to be disinflationary naturally. It is not a coincidence that in countries struggling with run-away inflation, especially Venezuela as well as Zimbabwe, they have actually come to be a more and more frequent means of payment.
Minimizing Transaction costs – Digital currency cash transfers are essentially immediate, commission-free and also error-free because of the blockchain.
Improving Tax Collection Efforts – Governments would be able to manage all payments generated in the private sector as well as tax them appropriately. This would certainly improve government profits, lower regulation costs and also reduce the size of tax evasion and also the black market economy. Bitcoin has come under pressure in different countries as a result of its association with money laundering and tax evasion. Developing a cryptocurrency under government control would certainly, therefore, allow a country to take advantage of the advantages of Bitcoin while eliminating its potential social and economic risks.
Getting Rid of Fraud & Counterfeiting – It’s not possible to counterfeit a cryptocurrency which is based on the blockchain. This makes monetary fraudulence almost impossible, lowering the policing costs of governments.
In general, it feels like the global race to digitalize currencies is in its starting phases. Countries are realizing that whoever first produces a viable national cryptocurrency will reap the benefits of increased investors interest, new investments as well as a technical first-mover advantage. An increasing number of these initiatives can be expected in the future, as the popularity of Bitcoin and cryptocurrrencies continues to climb.