The rapid growth and acceptance that cryptocurrency is getting worldwide have become a problem that Regulatory bodies and big financial institutions can’t get a hang of. How digital assets are becoming the mainstay, one that is devoid of government and international regulation, still beats the centralized powers that exist senseless.
So, in their bid to curb what they don’t understand, and put a leash on a stray dog called cryptocurrency and blockchain technology, many old, traditional financial heads worldwide are clamoring for an outright ban of cryptocurrency. The argument from these people is that unchecked, and unregularized currencies will plunge the world into deep financial troubles. And in the nearest future, fuel and finance nefarious and terrorist activities.
These fears, however, aren’t shared across the board. There are some top financial experts, people of the old, traditional financial block, who believe an outright ban on cryptocurrency will only deepen whatever cancerous effect they fear crypto will have on the world. One of such persons is Gita Gopinath, a chief economist of the International Monetary Fund.
WHAT GITA IS AFRAID OF?
According to Gita, an outright ban on cryptocurrency will only take control off the hands of international money and financial regulators, thereby bringing their worst fears to fruition.
The international community have been vehemently against crypto, sighting cases of money laundering and terrorism financing against the use of crypto. The traditional financial world also believes that crypto’s volatility makes it a bad investment decision, whether as a store of value or a legal tender. But the adoption by individuals and big institutions have proven their fears not as deep.
In the wake of the growing adoption, these traditional financial institutions have clamored for an outright ban of cryptocurrency. They have, just like what the Chinese government did, defined crypto as a risky investment and one that gravely affects the economy of any country.
From arguments of crypto weakening the value of country fiat currencies to environmental effects of mining these coins, to security bridge concerns, the reasons for a ban on crypto is endless.
However, it seems as though the more these regulators try to clamp down on crypto and play down its importance in shaping global economies, the more crypto gets popular and accepted by everyday people.
Now, you might be wondering why everyday people will love crypto and the traditional financial institutions will be against it.
Fairly simple answer, if you ask me.
Cryptocurrency allows for some high level of wealth distribution since there are no central bodies controlling its creation and distribution.
On the other hand, traditional financial institutions are against crypto because of its decentralized nature. Crypto’s decentralized system makes it hard for regulators to place taxes on crypto, monitor its usage and transfers, and also control how it is distributed. Hence the disparity in acceptance between traditional financial institutions and regular people.
So, what is next for crypto if the big traditional financial powerhouses are against it?
It keeps trudging forward like an unstoppable stallion on a mission.
Countries like China who’ve banned cryptocurrency are looking for alternative digital assets to replace what cryptocurrency had been. Central Bank Digital Currencies (CBDC) are the plans many countries that are against crypto are rolling out. CBDCs are supposed to serve as the digital versions of the country’s fiat currency.
However, one thing these countries are missing is that people are welcoming of cryptocurrency because it is decentralized.
Countries such as China, who has banned all forms of cryptocurrency in the country, India, which has banned any form of exchange on the best cryptocurrency exchange platforms, or Russia who have stopped mutual funds from investing in Bitcoin, are all searching for solutions to fill the vacuum their ban on crypto has created.
But the truth remains: crypto, given how far it has spread, can’t be tamed. It can’t be banned from use because people will always find ways to trade cryptocurrencies on redot.com and other cryptocurrency exchanges.
And with the growing popularity and adoption that NFTs and metaverse is getting makes banning crypto even harder.
So, what is the way forward?
What can international regulators and financial institutions do to solve this knotty problem?
Gita Gopinath believes that global policies on cryptocurrencies should be created instead of banning it outrightly.
According to the soon-to-become deputy managing Director of the International Monetary Fund (IMF), if countries banned cryptocurrency activity, it will fuel the illegalized crypto exchanges and encourage many offshore exchanges. These offshore exchanges will thrive because most crypto enthusiasts and traders will go to them.
Gita Gopinath comment suggests that countries understand cryptocurrencies and its many complexities. Then, create laws that are beneficial to all involved.
Yes, the cryptocurrency space is still new, and there are bound to be regulatory policy mistakes, but with deeper understanding and an open mind from regulators and government officials, they can find a middle ground.
Now, here is the thing. Banning crypto will have more negative effects on the economy of these countries. The taxes that could have been gotten are lost, and the plethora of financial and job opportunities crypto provides will be lost. Therefore, banning cryptocurrency when people will find other means to exchange, trade and carry out other activities with cryptocurrencies is unwise.
WHAT IS THE SOLUTION?
The fears that traditional financial institutions have about cryptocurrency are valid, but like earlier mentioned, curbing whatever ills they fear that people will do with crypto can’t be achieved by banning cryptocurrency outrightly.
Embracing the technology and working with people who have more knowledge on how the technology and the crypto space works will help these regulators better manage whatever negatives that may come from crypto.
The solutions will be gradual.
As we progress in the use of crypto, web3.0, the metaverse, NFTs and all that the new blockchain technology has to offer, we will face new hurdles, new problems. But with an open mind, we can all handle these challenges together, as a team, not as antagonists. The finance and economy of the future looks to be shaped by the new technology. With every new technology, we all learn along the way.
So, like Gita Gopinath said, instead of banning cryptocurrency outrightly, creating and implementing a global policy on crypto is a better decision.