Banning cryptocurrency – is it dangerous or justifiable?
There has been a lot of controversy in the international market about the use of cryptocurrency as a currency. For many reasons, it’s often considered not fit to act as an alternative currency.
As a result, many countries have taken steps to abolish the free rules of market cryptocurrency. For example, China has recently banned Bitcoin from its role in the Chinese market as a mining platform.
Cryptocurrency has a big domain area in China, as 65% of all the Bitcoin has power resources is established in China. So these will affect every Bitcoin user, inside or outside China and even the company itself. A 20% drop in the value of Bitcoin was seen after this initiative. However, Bitcoin is still a standing string with considerable value and many buyers.
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Is the banning of cryptocurrency a good decision in the first place? Will it improve the economic conditions or worsen them? Firstly we need to know the reasons behind the step and what causes so many governments to consider this issue.
Reasons to abolish cryptocurrency like Bitcoin from the market
Bitcoin is a well-known and highly valued cryptocurrency in the market. It is known for its drastic growth in the market and how many people have become wealthy investing in bitcoin. So Why Does a country like China will ban it? Experts explain that the primary purpose is to prevent the expansion of decentralized currency and usage of significant currency and safeguard from further competition.
One of the possible reasons can be that cryptocurrencies are becoming more popular. Because you can trade, invest, exchange in it, along with its digital benefits, accessibility and dynamic functionality in technologic aspects. However, many countries are concerned cryptocurrencies might take over the nation’s primary currency and unbalance the economy.
We cannot blame the authorities for this concern, as cryptocurrencies are known to be volatile. Using an unstable currency can be disastrous for any economy as prices of commodities will not be fixed, and exchanges will not be possible.
Moreover, cryptocurrencies are anonymous and secured between two exchanging parties. So authorities cannot track the flow of currencies in the market and will be unable to prevent any illegal work from taking place. It is the primary concern the Chinese government has shown while making this decision, as this can be misused for money laundering or illegal payments.
Effects on the economy after cryptocurrency is banned
We have seen that the banning of cryptocurrency might not be the ideal solution. As discussed, Bitcoin faced a massive drop in market value by China’s initiative. So you can imagine millions of people investing in cryptocurrency suddenly facing a massive loss in their investment, with some of them unable to trade internationally anymore.
After China imposed its ban, the value of Bitcoin fell from $ 50,000 to $32,000 or a decrease of 36%, with other cryptocurrencies like Ethereum losing as much as half of their value. This imposition results in many Chinese investors losing money after investing in these cryptocurrencies. It also includes the decreased amount of high-performance computer parts needed for crypto mining.
It could be far worse if authorities decide to ban these virtual coins altogether. As cryptocurrencies hold a massive proportion of the economic trade volume, banning leads to more minor exchanges and investment in the market, leading to a rapid fall in the economic marks or, worst-case scenario, an economic depression like the one that happened in the USA.
In the end, it is seen that the Chinese government has seen some potential flaws in using cryptocurrency as currency, thanks to its volatility and other reasons. But they might have underestimated the demand and importance of cryptocurrency in economic trade today. So it has been concluded that banning cryptocurrencies brings more problems than solving them.