Bitcoin and blockchain technologies provide opportunities for businesses in traditionally underserved markets like the developing world. Through cryptocurrencies, local traders and financial institutions can now establish a link to the global market with much less difficulty than through traditional routes. It would be beneficial if you investigated some of the better options on the market, such as cryptocurrencies and, most importantly, bitcoin on bitcodelegend.org.
However, government authorities need to understand how these technologies can disrupt traditional regimes, how they could be used for bad if not monitored carefully, and most importantly — whether users should embrace the technology.
Should government authorities embrace bitcoin and blockchain technology?
The question is whether governments in developing countries should embrace technologies like bitcoin and blockchain. Bitcoin technology can enable microfinance, opportunities for remittances and transactions in developing countries, essential financial services to enable the growth of new businesses without the need for a traditional bank account, and even allow citizens to start their businesses through an innovative decentralized banking system.
However, there are also risks associated with allowing this technology to evolve. These can range from having no governance controls over how it is used to giving government authorities an uncomfortable monopoly over the movement of money throughout the economy.
As was thought long before bitcoin entered the scene, regulations on how money is spent in developing countries must be implemented by users before this disruptive change becomes a reality. The idea of a decentralized currency, or even a financial system in general, is understandably unsettling to those who rely on government money to function. However, regulations can be implemented using some of these new technologies.
While it would be impossible for a central bank to monitor every bitcoin transaction, there are several ways for agencies like tax authorities or law enforcement agencies to access user data. These channels can be used by people under the supervision of regulatory authorities to track illegal transactions and activities. Users can also use them to encourage good practices in transactions through the system. However, these new technologies also pose challenges concerning government control over its citizens and the economy.
Why should government authorities use bitcoin and blockchain?
1. Inefficiency and corruption in government money systems
No government should be in denial about the challenges associated with the bureaucracy of currency exchange. A simple look at many governments across the globe shows that even a few days’ worths of transactions can take up an entire year’s worth of manual labor. It is easy to imagine how the costs associated with these transactions could cut into vital infrastructure or public services funds.
Additionally, as seen in Mexico’s recent currency crisis, there are risks involved when a government is forced to rely on its citizens’ trust in their bank accounts and cash reserves. The potential for corruption is also ever-present but difficult to quantify without thorough monitoring of all transactions and account activity. Bitcoin and blockchain technologies could make these transactions much easier and more efficient.
2. Value storage in government currencies
Governments worldwide have struggled to maintain the trust of their citizens in recent years. Unfortunately, as is typical with fiat currency systems, this lack of faith often results in losing the value of a country’s money. In countries without well-established credit or foreign reserves, this can lead to issues with maintaining a stable economy and can lead to problems for individuals who need access to their money abroad — particularly those who rely on savings from past income (retirees, emergency funds) or those who need to send remittances abroad (migrants). Bitcoin and blockchain technologies could provide another option for governments to consider to decrease the risk of losing control over their money.
3. Microfinance and banking alternatives
No one can deny that the core idea behind bitcoin has changed how we think about money. The ability for anyone with an internet connection to have access to a full-featured digital bank account is a powerful tool for economic development. One area where this technology is already starting to be used is in microfinance — providing banking services to those who may not otherwise be able to receive them. While bitcoin is not the only currency being used in these transactions, it has some unique benefits that can be leveraged by blockchain to improve how microfinance works.
4. Remittances
The fees associated with remittances are a fact of life for many individuals and businesses relying on these transactions to support their livelihoods. While costly money transfers may seem trivial to many, those who rely on remittances desperately need lower costs to maintain a stable life. It is one area where blockchain technology has shown real promise — particularly in areas where banks may still be scarce or unreliable. Emerging companies are working to create a system that users can use to send money internationally at a much lower cost than traditional methods.
5. Tax services and tracking illegal transactions
As was discussed earlier, it would only be possible for government authorities to track bitcoin and blockchain transactions with regulatory changes or demand access from users’ private keys. It does not mean that the user cannot track individuals through their bitcoin activities — it’s just more complex than with traditional forms of currency. While this could be most beneficial in countries where individuals may engage in tax evasion, law enforcement agencies can also use the same tools to track criminal activity and prevent illicit practices — even if those actions involve cryptocurrencies.
