I feel like in the frenzy that saw Bitcoin lose almost half of its value and the entire market lost $ 1 trillion in market cap, most people missed the significance of the changes. caused by China and the United States (US) breaking the very foundations of crypto.
Of course, everyone recognized the impact of China’s decision to ban financial institutions from dealing with digital currencies (and the announcement of a crackdown on mining), as it was one of the main drivers of the fall in prices.
However, less attention has been paid to what this means for the future of digital currencies, and it’s not bright.
That is, the key promise of decentralization – that cryptocurrencies would offer an alternative to fiat currencies issued by the state and controlled by central banks – is effectively dead.
Any country in the world can introduce legislation banning the use of cryptocurrencies as legal tender.
It doesn’t matter that you can always keep it secret in your non-custodial private wallet. Your currency can stay “decentralized” – you just can’t do much with it because the government won’t allow you to.
What happens when cryptocurrency is banned?
No legally operating company will accept your BTC or ETH if their use is sanctioned by law. Regardless of the quality of the technology, its security, stability and stability. If it’s forbidden, let’s go.
And this is not a problem specific to autocratic China and its Communist Party which has long shown its distrust of crypto.
The United States has also fired its own salvos, with the Treasury introducing a proposal to make it mandatory for all crypto transactions valued above $ 10,000 to be reported to the Internal Revenue Service (IRS).
What is your encryption and secrecy worth now, if the government can demand the necessary information at will?
When filing your taxes in America, you are already asked if you have participated in virtual transactions and now need to report capital gains accrued through crypto trading. Yes, with holding your precious digital assets comes a tax bill in the fiat currency you hate so much.
To make matters worse, it is your responsibility to track the actual market value of every transaction you make and calculate your tax liability, or risk legal consequences.
It’s only a matter of time when the rest of the world follows suit (the EU is also working on its own regulatory framework).
It turns out that despite all the promises of independence from national authorities, cryptocurrencies cannot really escape them. Worse yet, they can overwhelm you with a bureaucracy you never even knew existed.
Of course, “technically” you can keep your Bitcoin in a private crypto wallet and not disclose it to anyone, trying to point the middle finger at politicians and tax collectors.
But if you do (most won’t, let’s be honest), you risk breaking the law. If you ever want to trade the holdings for fiat, the information is going to bubble somewhere, leaving you with not only a tax bill, but a painful penalty as well.
Direct transactions won’t protect you either, especially if other countries follow China’s lead and restrict the use of non-public digital currencies, which could make the contents of your wallet worthless.
This brings us to another threat – uncertainty over the future legal status of any cryptocurrency in any country in the world.
This will have an impact on the value of your digital currencies
Each law has a direct impact on current and forecasted future demand.
Given the lack of obvious technical advantages (cryptocurrencies are currently both more expensive and slower to transact, especially for BTC) and incentive to use in illicit activities and tax evasion, most governments are likely to introduce additional regulation, which will impact the value of your crypto holdings.
If you thought Elon Musk was bad – when all he had to do to shake up the whole market is to post a few tweets – think about the consequences of current laws directly restricting the use of digital currencies.
Parliaments still do not know how to react to this new technology and unlike China, where the party sees it as a possible challenge to its grip on power, they will proceed with caution.
Ultimately, they are required to set stricter rules on the use of decentralized crypto whether you like it or not, as no challenges to government control will be allowed. And the world’s major superpowers clearly want to show who’s really in charge.
Featured Image Credit: Blocktempo
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