Governments around the world have increasingly criticized Bitqh as a dysfunctional currency undermining its capital controls. Some have even banned banks and financial institutions from trading cryptocurrencies because it is an unregulated market. Bitcoin continues to face increased government scrutiny, with significant impact on regulatory pressures.
Meanwhile, the global adoption and use of Bitcoin has grown by huge margins in recent years. Experts believe this trend will continue as many international institutions, companies and individuals adopt Bitcoin as a more reliable payment and investment method than traditional assets and fiat money.
Perhaps the inability of governments to stop bitcoin is the main reason behind its increasing adoption. So why can’t governments stop Bitcoin?
decentralized financial system
Bitcoin decentralization is a major concern raised by many governments and regulators in this regard. Central banks and regulators were the sole custodians of financial transactions around the world. For example, the United States depends on the Federal Reserve to print and create money for its economy. This institution is also a lender of last resort, regulating all transactions in the entire US economy.
Traditional systems task governments and their imposed agencies with regulating the supply and circulation of money. They usually enter into multiple intermediaries such as banks and financial institutions to distribute and control the flow and use of funds in the economy. This gives governments the ultimate power to dictate how money is transferred, which sectors it should be distributed in, and to track its use. They also generate revenue through corporate and special taxes.
Bitcoin can dismantle traditional financial systems imposed by governments because it is decentralized, and has nothing to do with any government or financial institution. Unlike fiat currencies that are distributed and regulated by central banks, there is no central authority that controls the supply and use of bitcoin. Instead, the Bitcoin network relies on independent miners to mint new tokens and validate transactions. Bitcoin’s decentralized network also includes thousands of nodes distributed randomly around the world.
Bitcoin allows anyone with a full node to join the network. Miners generate new Bitcoin tokens by solving complex mathematical puzzles dictated by the Bitcoin protocol. Moreover, Bitcoin is also mined at a predetermined rate, which is not subject to the economics of supply and demand. This eliminates intermediaries such as banks and money processors, undermining government control over the supply and use of funds. Therefore, governments have absolutely no way to stop the adoption and use of Bitcoin.
Governments usually impose various laws and regulations to monitor transactions within and outside their borders. For example, they require banks and other financial institutions to abide by Know Your Customer (KYC) rules. This makes it necessary for companies and individuals to provide proof of their true identity in order to conduct transactions. Moreover, traditional systems also require intermediaries to oversee all cross-border transactions. This allows governments to tighten their grip on financial transactions, and sometimes even back payments.
However, Bitcoin operates on a different concept than traditional systems. It is based on a peer-to-peer blockchain network, which limits transactions to the two parties involved. Bitcoin funds transfers are done on the blockchain, eliminating the need for intermediaries to distribute and manage funds. Cryptocurrency exchanges like to facilitate crypto transactions, but cannot regulate how and where people spend their bitcoins. The peer-to-peer network of Bitcoin makes it extremely difficult for governments to monitor transactions and control the flow of funds. It also allows users to receive and transfer money around the world without government interference.
While governments have expressed increasing concerns about Bitcoin, there is no global consensus on its regulation. However, Bitcoin’s decentralized network and peer-to-peer transactions are the main reasons why governments can’t stop it. (Press note).