[2015-04-20] Investopedia: Why Governments Are Afraid Of Bitcoin

[pawel7777]

Why Governments Are Afraid Of Bitcoin

http://www.investopedia.com/articles/forex/042015/why-governments-are-afraid-bitcoin.asp

Bitcoin claims that “It is the first decentralized peer-to-peer payment network that is powered by its users with no central authority or middlemen.” That lack of central authority is the primary reason governments are afraid of the cryptocurrency. To understand this fear, it is important to know a little bit about governments and conventional currencies.

In What Do We Trust?

Fiat is a term used to describe the conventional currencies that are issued by governments. Fiat currencies have value because governments say that they do. To an increasing number of people, that promise means nothing. After all, fiat currencies are not backed by any tangible assets. You can’t return the currency to the government in exchange for a bar of gold or silver, a can of beans, a pack of cigarettes, or any other items that might have value to you. Fiat currencies are backed by the full faith and credit of the government that issued them and nothing more. If you want gold, silver, beans, or smokes you need to exchange your fiat currency with a person or entity that possesses the item that you want.
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[1Referee]

I don't think there ever will be a government willing to fully adopt Bitcoin as they can't control everything around it.

That doesn't say they won't make a Bitcoin clone for themself where they control every process in full. That's more likely to happen at some point in the future.

[pawel7777]

I don't think there ever will be a government willing to fully adopt Bitcoin as they can't control everything around it.

Agree, I've never seen it as plausible scenario.

The only countries that could realistically declare Bitcoin as official currency are micronations like Sealand or Liberland.
Other scenario, less likely to happen, is when BTC grows to solid payment alternative in some 3rd world country, then if their main currency collapse, bitcoin could naturally replace it (although temporarily).

That doesn't say they won't make a Bitcoin clone for themself where they control every process in full. That's more likely to happen at some point in the future.

They'll likely move towards blockchain-like technology in the future, but whatever it will look like, it will surely be centralised, so I wouldn't call that 'bitcoin clone'.

[Chef Ramsay]

Government by its very nature is coercive force and special interests get their hands involved in it for a reason. Govt tends to keep growing and spend more money in order to keep more people dependent on it and thus wanting more of it year on year. So, instead of paying the yearly tab in full, the central banks monetize the debt or counterfeit it in order to keep spending w/o it becoming so obvious how upside down the finances are to the public. You can't create extra bitcoin out of nothing and you can't hide documents on the blockchain so this sort of set up is undesirable to most central planners and bureaucrats.

[seoincorporation]

Why Governments Are Afraid Of Bitcoin

http://www.investopedia.com/articles/forex/042015/why-governments-are-afraid-bitcoin.asp

Bitcoin claims that “It is the first decentralized peer-to-peer payment network that is powered by its users with no central authority or middlemen.” That lack of central authority is the primary reason governments are afraid of the cryptocurrency. To understand this fear, it is important to know a little bit about governments and conventional currencies.

In What Do We Trust?

Fiat is a term used to describe the conventional currencies that are issued by governments. Fiat currencies have value because governments say that they do. To an increasing number of people, that promise means nothing. After all, fiat currencies are not backed by any tangible assets. You can’t return the currency to the government in exchange for a bar of gold or silver, a can of beans, a pack of cigarettes, or any other items that might have value to you. Fiat currencies are backed by the full faith and credit of the government that issued them and nothing more. If you want gold, silver, beans, or smokes you need to exchange your fiat currency with a person or entity that possesses the item that you want.
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Nice article, i like it, thx for share it!

I think the #1 problem Bitcoin - Gov. is about Taxes. If you don't know who send money to who, have a taxes control will be hard.

[BitDreams]

It seems to me that government will eventually conduct business entirely through blockchains. The blockchain will likely serve as lawyer and prosecutor but should never be judge or jury in my opinion and at the most extreme, include a mechanical turk tax. Contracts and bonds  for municipal needs might be the first sign of the blockchain eating government. Government officials could end up voted in by the worth of their blockchain successes.

The automation of financials will remove the feeding grounds for some of the brightest and most ambitious humans, freeing them up to care better for humanity and science.

A private residence might have a household blockchain accessible only to the head of household using as a gateway a neighborhood blockchain which is inside a community blockchain, within a township beside a city in a county, etc.

It's going to be a great show to watch.

[bitbouillion]

Why Governments Are Afraid Of Bitcoin

http://www.investopedia.com/articles/forex/042015/why-governments-are-afraid-bitcoin.asp

Fiat is a term used to describe the conventional currencies that are issued by governments. Fiat currencies have value because governments say that they do.
...

Nowadays fiat currencies have value, because money is created out of debt. Fiat is essentially a debt repayment coupon and debtors have to gain them through work or by doing commerce, thus creating new goods and services. If money is created out of nothing (simply printing and issuing it), then it has essentially no value.

[bitbouillion]

I don't think there ever will be a government willing to fully adopt Bitcoin as they can't control everything around it.

If we really get a people's government, why they should not declare bitcoin as the legal tender? US did not control gold and silver mines and refineries, but gold and silver was legal tender then. 

[Kprawn]

I think this part says it all .... " lack of central authority is the primary reason governments are afraid of the cryptocurrency... "

They need to control everything ..... How much value your fiat currency have... how much of that they can take back through TAX ....What you buy ....Where you buy it.... How much you can buy .... and from whom you can buy it from. 

They are using scare tactics to avoid losing control by regulating something that might threaten it's authority. { All these things you see in the media, like Bitcoin being used for Drug trafficking, prostitution, terrorism, money laundering, tax evasion and Child porn }

They simply ignore all the good things that may come from using this technology. 

[bitbouillion]

Fiat in the central bank age is not about central authority and control but protectionism. The government does not control the amount of money created by private banks, nor does it control the flow of money. The central bank tries to influence via monetary policy, but it does not control anything either. The fiat protectionism is the result of a deal between a private banking cartel and a government.

[johnyj]

Fiat in the central bank age is not about central authority and control but protectionism. The government does not control the amount of money created by private banks, nor does it control the flow of money. The central bank tries to influence via monetary policy, but it does not control anything either. The fiat protectionism is the result of a deal between a private banking cartel and a government.

Exactly, unless in communist country, western government do not control fiat money, they are prohibited from influence the central bank's decision. What they are interested is getting endless credit line from central banks. For them it is no difference between bitcoin or fiat money, both not in their control. Government can only force some policies to audit banks/bitcoin business but the effect is very limited since they don't have access to these business' core data. In fact, they could gain more control over bitcoin than banks, due to its transparent ledger

[bitbouillion]

What they are interested is getting endless credit line from central banks. For them it is no difference between bitcoin or fiat money, both not in their control.

Although direct funding of government is prohibited, the central bank can provide literally endless liquidity for government funding. In economic hard times the central bank buys government bonds on the secondary market, but in extreme situations like wars, it's possible that legislation allows even direct government funding. Therefore governments are monetary sovereign with fiat. They own the printing press, if they want to. In case of bitcoin or gold, they don't have that option. Therefore I think it makes a big difference for governments.

[Ghostface]

I don't think there ever will be a government willing to fully adopt Bitcoin as they can't control everything around it.

That doesn't say they won't make a Bitcoin clone for themself where they control every process in full. That's more likely to happen at some point in the future.

They don't have to be able to control it. They'll just want their cut and they'll get it easy enough by regulating and taxing it. They don't need to do anything but just sit back and collect their money like they do with any taxes.