Why is it not a good idea to regulate Bitcoin prices?
Since the introduction of Bitcoin in 2008, it has created controversy and news – mainly due to the absence of any legal authority.
The government cannot regulate the price of Bitcoin because of a fear of creating an equitable monetary system on Official trading platform. This absence of central authority has led to an increase in criminal activities, and the absence of any legal proof of money laundering and other fraud cases.
One benefit of Bitcoin is that it uses peer-to-peer trading, which allows its investors to directly transact with the person or company without the involvement of any third party to facilitate transactions. It uses a blockchain platform that records Bitcoin transactions.
Experts believe that it is not a good idea to regulate Bitcoin prices because its current volatility attracts new investors. However, if the government regulates its price, the prices will become stable, and relatively no growth would be seen in Bitcoin prices.
An alternative, rather than taking the prices completely under control , would be for the government to impose a tax on the fiat money used to buy the virtual tokens.
Reasons to not regulate Bitcoin prices
Here are some reasons against regulating Bitcoin.
Loss of monetary sovereignty
Economics students understand that the country’s central bank controls that money. Suppose cryptocurrency prices are controlled by any country’s central bank, and people use cryptocurrency as a medium of exchange.
It would then become difficult for a central bank to use monetary policy tools to control the money supply, leading to the loss of monetary sovereignty. This concern is shared by all the major economies, including India.
Money laundering and terror financing
Terrorists receive money across borders through cryptocurrency. Its decentralized and censorship-resistant feature makes it more likely to be used by terrorists. Instead of taking it entirely under control, the government can monitor the activities across the blockchain. There are many tools which can use to track untruthful activities.
Governments can collect tax easily without regulating the price of Bitcoin. Government can impose a tax on the fiat money used to buy Bitcoin, as Bitcoin is a decentralized platform and can be used as a shield against tax collection. It can be a loss for the government, but fiat money, which the central bank controls, can be used to collect taxes.
Safety of payment
Cryptocurrencies are virtual tokens that do not involve any third party in payments. It is safer than fiat money, as it works on a decentralized platform called blockchain and uses peer-to-peer transactions, which makes it safer.
Cryptocurrency transaction records are preserved on the ledger, which is public. You can use crypto to send and receive money using crypto wallets.
Fewer transaction fees
Compared to credit and debit cards, cryptocurrency charges a minimum amount for a transaction. This is because Bitcoin transactions are like cash from person to person, but in credit card services, there are many intermediaries between merchant and customer to provide the necessary services.
Bitcoin transactions do not need intermediaries to validate the transactions. On the other hand, fiat money goes through many formalities, which increases paperwork. Crypto uses the blockchain to verify the transaction, and the transactions are permanently recorded, enhancing the safety of the transaction.
If a government regulates the Bitcoin prices it will be difficult for that government to collect taxes and keep an eye on a decentralized structure spread across many countries. Although government undertaking can have a little price effect on Bitcoin prices, with some improvement, Bitcoin can still beat the 2% fees of big banks which they charge on credit and debit cards.