It’s difficult to know whether or not cryptocurrency will be the future of the global economy because of its complex nature and its association with illegal activity. For those who do not know what cryptocurrencies are, they are digital currencies that use blockchain technology to make secure and mainly anonymous online transactions. One must pay real currency to obtain cryptocurrency. Popular cryptocurrencies include Bitcoin (BTC) and Ethereum (ETH); however, thousands of cryptocurrencies exist. Cryptocurrency is not widely accepted by the public or by international governments as of yet because there are many challenges and controversies surrounding its use. Here’s why people and some countries remain skeptical about cryptocurrency and the ethical dilemmas that come with using it.
Difficult to Make a Valuation
Since many different types of cryptocurrencies exist, it is difficult to determine the value of a specific type of cryptocurrency. There are no accepted metrics or systems in place to know how cryptocurrency should be converted. For example, Bitcoin and Dogecoin would be valued completely differently based on their individual differences. Some analysts have tried to treat cryptocurrencies like fiat money, defined as “money that is considered legal, approved, and distributed by the government.” However, this method has not been deemed suitable since cryptocurrencies aren’t regulated and are not widely accepted as a form of payment for common purchases or debts. A common method used to value cryptocurrencies is considering the total market value of a specific cryptocurrency; however, that is still not an accurate way of determining the value of digital currency.
Lack of Regulations
Furthermore, it is difficult for governments to regulate the use of cryptocurrencies because they are virtual entities. For example, the U.S. government distributes and regulates the amount of money going in and out of their economy by using banks and financial institutions. Cryptocurrency is considered untrustworthy because anyone can release cryptocurrency, it cannot be tracked, and it undermines the current financial infrastructure.
As there is no legal protection, investing in cryptocurrencies is high-risk. Some countries have completely banned the use of specific cryptocurrencies while allowing the use of others. They have also put a regulatory standard in place for trading and reporting as a way of exploring the opportunities cryptocurrencies can offer.
Association with Illegal Activity
Moreover, cryptocurrency has a bad reputation because its untraceable nature makes it an ideal form of payment for criminals. Since most transactions are anonymous, it’s difficult to discover the identity of an individual who is possibly involved in illegal activities. Because most addresses associated with cryptocurrency can only be accessed by the owner, criminals are unlikely to get caught by the authorities when laundering money via blockchain.
Overall, cryptocurrency is not accepted by most governments because there is no way to control or to keep track of the money. If cryptocurrency were to gain popularity among the masses, it could possibly threaten the current financial framework. Furthermore, the lack of legal recognition and regulation makes it perfect for criminals to use.
Mursal Rahman | Contributing Writer