Why Some Countries Ban Crypto And Are Crypto-Friendly?

There is no denying that cryptocurrencies are making an impact on the world, but they are still met with skepticism and outright hostility in some countries, especially given the volatile nature of the crypto fluctuating value, as seen on websites like this one. There have been a number of countries that have decided to ban the use of cryptocurrency in their economies. These include China, Egypt, the Middle East, and some African countries. There are a lot of good reasons for this, and their worries are well-founded. Despite the fact that countries that permit cryptocurrency use are aware of the concerns that led to these bans, they have collectively decided that these issues can be addressed, while other countries have decided they are prohibitive. Nevertheless, what are these concerns that have prompted some countries to ban the use of cryptocurrencies?

Contributing to Illegal Activity Financing

It is because of the difficulty of tracking cryptocurrency transactions and the anonymity of transactions between digital wallets that cryptocurrencies are popular in the black market and for the trading of illegal goods. This raises questions about the role of crypto in supporting criminal activity. Money laundering is also a major use for it.

Destabilization of Financial Systems

Developing countries with weaker currencies in the global market worry that their own GDP-backed currencies will be unable to compete in global exchanges where decentralized but more popular currencies like Bitcoin outperform them. This is understandable because digital currencies are difficult to regulate.

Crypto Mining Is a Drain on Energy Resources

In the case of Bitcoin, "mining" entails processing the Bitcoin transaction blockchain, which is growing at a rate of millions per day. Miners are rewarded with new Bitcoin as payment for their participation in this process. This shows that if you contribute a computer system to the crypto transaction computation process and get paid in valuable cryptocurrency, you have an incentive to participate in the process. Entire mining operations have been set up in countries around the world, with hundreds of computers mining for crypto constantly. There have been instances of local blackouts and strain on the energy infrastructure due to the energy needs of such an operation.

Tax Evasion

To avoid paying their fair share of taxes, wealthy elites may transfer their assets to cryptocurrency, which is not taxed in their own country. Several countries, notably the United States, Canada, and the United Kingdom, have begun taxing cryptocurrency holdings, but the majority do not. Some people have tried to avoid paying large amounts of taxes by transferring their assets to a form that is not subject to federal income tax.

Distrust of the Technological Aspect

Mystifying and difficult to understand in countries that are less technologically advanced, the virtual and mobile nature of a currency that does not have a central authority is confusing. Historically, the value of a currency was determined by the economy of the country issuing it, which was based on the exchange of physical goods or the provision of legally recognized services. Cryptocurrency does not follow this model. For example, the value of Bitcoin is determined by its scarcity and demand, as well as where it is accepted for trade, not from a recognized economy. Many countries have opted to ban it outright because there is no governing body or clear understanding of the technology required to use it.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes