intro
Bitcoins were invented as a Bitcoin Boom that has no centralization and is not governed by any particular body. This created the feeling of an independent currency unaffected by the governance of any political or social body. It is different from tangible assets and currency because the value of any currency or tangible asset is decided by the government. A piece of paper has some value because the government has declared it. In the case of cryptocurrencies, especially bitcoins, this is not the scenario. It is an intangible digital asset whose value depends entirely on factors independent of any governance. Bitcoins and their use have caught the attention of not only investors but also various governments due to the revolutionary concept behind them. It’s almost like a contrarian asset to own! Therefore, for obvious reasons, governments of various countries fear its use and storage. Bitcoin is recognized as an “alternative currency,” but its acceptance as mainstream currency seems like a distant dream.
Reasons why bitcoins are not an acceptable currency in national banks
There may be several reasons why Bitcoins are still not the fiat or traditional currency used by banks or other official transactional operations. A few of them are noted and explained below:
- People's Trust :The Fiat currency is gaining credibility with the government. It is a tangible currency that has earned its trust because the government has backed its trust and credibility. With digital currencies like bitcoins, one cannot buy food, gold, money or even a pack of cigarettes, but with fiat currencies, one can exchange it for necessary items. Therefore, fiat currencies have gained more credibility and trust among common people.
- Government control :Fiat currencies are fully controlled by the government. The issuance or destruction of currency is the prerogative of the government itself. The main government agencies to control the flow of fiat money are the banks. Therefore, the tool used to manage and plot money is primarily monetary policy. They are essential tools for controlling a nation's economy. But as already mentioned, digital currencies like Bitcoin do not fall within the scope or limits of monetary policy. Therefore, the government cannot control the flow or trace Bitcoin investments. Currency control has many impacts like crime control, business environment, economic movement, etc. Since bitcoins do not fall under the same scope, they are not accepted as official currency in domestic banks.
- Disruption to government fiscal policies: Fiscal policies are created by the government to restrict or increase the flow of money in an economic system. For job creation, avoid inflation or recession in an economy that could be predicted to spin out of control. Fiscal policies have no control over this source of alternative currency, so it sometimes disrupts politics and clashes with it. Therefore, bitcoins are rejected as the main currency in any national bank.
- Job :In exchange for the services offered by a bank, a service fee is levied, which creates an additional pool of currency to create jobs for bankers. This job creation is absent from any form of parallel digital currency. “Miners” are present in cyberspace and crack complicated and advanced level algorithms to allow buyers and sellers to trade this currency. As service fees, they are paid in the digital currency itself. This too becomes an obstacle in the process of creating traditional jobs and tracing service charges within the economic system. This is another major reason why banks do not accept bitcoins as a form of formal payment.
- Criminal Activities :Any parallel or untraceable economic activity can be easily used to finance anti-social activities and crimes. Bitcoins also took the blame for the same. Crimes like drug addiction, trafficking in children and women, illegal ammunition supply, have all been claimed to be aided and funded by bitcoins.
This ambiguity also causes banks to refrain from accepting it as the official currency. The government will never want to be involved in such illegal activities.
