How can governments respond to crypto?

Governments have never really been big crypto fans. While the finance minister and the president sometimes praised blockchain technology or even cryptocurrencies on a rare occasion, the overall mood was generally marked by suspicion and even hostility.

And now, with Facebook Entering the industry with its stable balance, this opposition barely concealed by cryptocurrency has become manifest in various ways. US President Donald Trump openly criticized Bitcoin and Libra in July, while a number of governments have already begun to flirt with the ideas of the cryptocurrency bans and the central bank's digital currencies.

These two potential responses are designed as a means of neutralizing the threat posed by decentralized or private currencies, such as Libra, to government monopolies over money. However, as many cryptocurrency experts report, it is likely that improving fiduciary currency alone will not reduce this threat, the main advantage of crypto being its separation from governments, central banks and other centralized institutions.

The fear and futility of banning crypto

Governments like to ban things. Bitcoin and cryptocurrency are no exception, as evidenced by their total or partial prohibition in the following countries: Afghanistan, Pakistan, Algeria, Bolivia, Bangladesh, Republic of Macedonia, Saudi Arabia, Vanuatu and Vietnam (bans complete); China, India, Ecuador, Indonesia, Morocco, Zambia, Nepal, Egypt, American Samoa and Qatar (prohibitions or partial restrictions).

However, despite the fact that various governments have responded favorably in recent years, it is clear that the ban on cryptocurrencies is not really a viable way to reduce the threat they are making. weigh on the government monopoly on money.

"Some governments have tried to ban crypto-currencies but that did not stop people from using them and expanding the sector," said Iqbal V. Gandham, chief executive of eToro UK – tells Cryptonews.com.

"If people want to use these tokens, governments can not do anything to stop this, it would be like trying to ban the Internet."

This "impossibility" is largely the reason why governments are afraid of cryptography. And now, the emergence of the Facebook Balance on Facebook has raised fears that a private currency will become a real rival of the national fiduciary currencies, as explained in Cryptonews.com by Glen Goodman, the author of The Crypto Trader.

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"Facebook's Balance is the first cryptocurrency that really scares big governments, even if it does not exist yet," he said. Donald Trump summarized the situation in a tweet by criticizing Bitcoin and Libra, saying that the dollar would be "ALWAYS" the dominant currency in the world.He knows that the US is getting major economic benefits from this position and protect it pretenders to the throne of money ".

Fiat digitization

Governments are therefore afraid of cryptocurrencies and can not ban them satisfactorily (at least in the case of decentralized coins). So what can they do?

Well, they can try to create their own digital currencies (CBDCs) and / or digitize existing fiduciary currencies.

"Governments will try to centralize [crypto], "predicts Sydney Ifergan, Cryptography Advisor," and at the same time, turn it to their advantage. "

This has already occurred in the infamous case of Petro in Venezuela, while China, Sweden, Ukraine and Uruguay have researched or planned their own CBDCs. Similar initiatives have been announced for Iran and Russia, apparently with the aim of evading US sanctions.

In addition to this, the US Federal Reserve recently announced its intention to create a national central bank payment system in the United States, making it faster and more efficient, and potentially superior to Bitcoin and other cryptos. in terms of performance.

But is it better?

The question is: even if the major countries launch their own centralized crypto-money or their new digital payment systems, will superior performance be enough to counter the threat of encryption for national monetary sovereignty?

Well, for starters, it's not even clear that a CBDC or a central bank-based payment system would be technically superior to the major cryptocurrencies. And as the author of cryptocurrency Mark Jeffrey explains, the development of such projects will be slowed by the centralized and cumbersome nature of the organizations that drive them.

"Recently, the Federal Reserve announced a real-time payment system called" FedNow. "However," FedNow "will only be available in 2023: ridiculously far into the future," he told Cryptonews. .com.

"It's like watching the taxi industry try to react to Uber: attempts go from comic to sad. The Federal Reserve has never been forced to innovate and compete: it has no idea how to do it. "

More importantly, there is also their lack of decentralization, which is the main selling point for real cryptocurrency.

"Cryptoassets like Bitcoin do not concern the digitization of money," says Iqbal Gandham. "The whole reason for creating Bitcoin was its ability to bypass financial institutions, such as banks, and issuing authorities, like governments, in order to create a borderless and decentralized currency."

"The simple act of symbolizing traditional fiduciary money so that it can be traded on the blockchain will not undermine the principle of creating crypto-assets, including Bitcoin."

For this reason, crypto has an advantage over CBDCs or real-time payment systems. Yes, they could possibly be faster than many crypto-currencies, but a relative lack of speed has not prevented Bitcoins from gaining ground in recent years, even though the Visa the network was and is still faster than its blockchain.

If society valued monetary freedom more than speed (which was a technical problem that could be solved) and price volatility decreased as the market evolved, the traditional system of fiat money could be confronted with serious problems. questions about its future.