Why are governments against cryptocurrencies

Cryptocurrencies have lots of gray areas and not all people understand what cryptocurrencies are all about. This also includes legal bodies and governments as well. In addition to that, there are several reasons why governments may be against cryptocurrencies. The main thing would be to bring some regulation so that it can be easier for them to make sure that all the money earned by people is evaluated and governments get a cut from that. Let's check out what reasons we have for why governments are against cryptocurrencies.

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Lack of control

One of the main reasons why governments may be against cryptocurrencies is that they do not have control over them. There are some instances where after digitalization, the government is not having some control over the FIAT as well. They make sure the rules are tightened to a greater extent so that they somehow gain control over all the money. That is why they bring lots of rules and regulations to FIAT. When it comes to cryptocurrencies, the rules have to be even harder for governments to manage. Cryptocurrencies are decentralized and operate independently of governments and financial institutions, which can make it difficult for governments to regulate them or prevent illegal activities. Not all governments welcome decentralization as it is a concept against them.

Financial stability

The government might sometimes think that it can be a good source of income for them if they impose a tax on cryptocurrencies and still allow people to use and trade them. But there is also a small risk in this approach. Cryptocurrencies can pose a risk to financial stability because of their volatility and potential for speculation. Governments may be concerned that a sudden drop in the value of cryptocurrencies could have a negative impact on the economy. Not just the crypto economy but the government fears that it could even affect the regular share market like how commodities can affect the other trades.

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Money laundering and illegal activities

There is a high chance that people can do many under-the-table transactions with cryptocurrencies. As we can see so many good things happening with cryptocurrencies, but there are also bad things happening here and there the government has no visibility over that and it is hard to bring regulations. Cryptocurrencies can be used for money laundering and other illegal activities, as transactions are difficult to trace and can be anonymous. Governments may be concerned that this could increase the number of illegal activities and undermine the rule of law.

Taxation issues

This is a major concern here. Though government tries to understand how they can regulate some aspects of trading and earning through crypto, the taxation part is still a pain. Especially when decentralization is involved, it is hard to regulate everything. Cryptocurrencies can make it difficult for governments to collect taxes, as transactions can be difficult to trace and some people may use them to evade taxes. Sometimes it is also like people have to be honest and disclose their earnings and pay their taxes. Otherwise, there are no ways to know about the earnings and transactions.

Competition

There is a high possibility that slowly cryptocurrencies can replace FIAT. Already digitalizing all the transactions is reducing the cash flow right now. It is a possibility that maybe cryptocurrenices can someday replace FIAT. Governments may be concerned that cryptocurrencies could compete with traditional fiat currencies and disrupt the current monetary system.

It's important to note that government stance on cryptocurrencies varies from country to country, some countries have outright banned it while others are more open to it. Governments are also actively working on how to regulate and oversee the crypto-currencies in a manner that doesn't disrupt the economic and financial stability while at the same time, not stifling innovation.

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