Why Countries Are Still Afraid of Virtual Currency?
Why Countries Are Still Afraid of Virtual Currency?
There are some countries that accept virtual currency, also known as crypto currency, but those countries only recognize crypto as a digital asset but not a currency. People all know that the new technologies behind that currency would bring us a lot of potential benefits but also risks for world finance so that countries are still developing their approach to regulating virtual currency. It is likely that the legal status of virtual currency will continue to evolve in the coming years, so why do countries only recognize them as a digital asset but not a currency? These reasons can be broadly categorized into four groups:
Virtual currency have a huge impact on how we managing our finance.
The first and biggest concern is the extreme volatility of virtual currency, the value of virtual currency can fluctuate wildly, making them unstable for use as a medium of exchange and a store of value. This is because virtual currency is not backed by any central bank or government, and the supply of some virtual currency is not limited. For example, the price of Bitcoin has fallen by more than 50% in 2022 and even a different coin named Luna dropped 99.7% in value in just a week, from 120$ to 10 cent
Also virtual currency has an extremely large impact on monetary policy, the widespread adoption of virtual currency as a medium of exchange could challenge the ability of central banks to manage the money supply and monetary policy. This is because virtual currency is not subject to the same controls as fiat currency.
Laws on virtual currency are still vague and not accessible to everyone.
Virtual currency is not centrally managed, regulated or guaranteed by any national institution, central bank or government authority. Also, not every country has regulations for virtual currency, this means that there is no protection for consumers who use virtual currency, and there is no guarantee that virtual currency can be redeemed for fiat currency at a fixed rate. Furthermore, the lack of regulations on virtual currencies makes resolving disputes related to virtual currencies very difficult
And because of the lack of legal protection, virtual money is exploited for bad purposes and illegal activities too easily such as money laundering, terrorist financing, and drug trafficking. Due to the nature of virtual currency transactions, which are conducted under virtual names, give the ability for people to make anonymous transactions and it is hard to find out.
Technology is not always as perfect as we imagine.
It is important to note that the blockchain technology itself is very secure and difficult to hack but, no matter how perfect and advanced the technology is, there are always loopholes to take advantage of. However, there are many vulnerabilities in and outside of the blockchain that hackers can exploit, the cryptocurrency ecosystem is still relatively new and evolving.
Most people are still awareness of virtual currency.
Many people do not understand how virtual currency works and for those who know, they consider virtual currency as investments like stocks or shares instead of considering it as a normal payment tool. This can make the majority of users reluctant to adopt virtual currency no matter how great the benefits virtual currency can bring.
In conclusion, despite the benefits virtual currency promises to bring, the risks of it are still too big for the world economy, which makes many countries still hesitant to accept virtual currency. Certainly virtual currency or crypto currency or any kind of itself in the future will have its rightful place, but not in the near future.