China and the US have just killed cryptocurrency decentralization

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I get the impression that in the frenzy that saw Bitcoin lose almost half of its value and the entire market lost $ 1 trillion in market capitalization, most people have lost the importance of the changes brought about by China and the United States (USA) very fundamentals of cryptography.

Image credit: Coinmarketcap.com

Of course, everyone recognized the impact of China’s decision restrict financial institutions to deal with digital currencies (and advertise a repression against mining) had, as it was one of the main drivers of the fall in prices.

However, less attention has been paid to what it means for the future of digital currencies and it is not bright.

That is, the key promise of decentralization, that cryptocurrencies will offer an alternative to state-controlled fiat currencies 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 still keep it in your private wallet without secret custody. Your currency can remain “decentralized”; you just can’t do much about it because the government won’t let you.

What happens when cryptocurrency is banned??

No legally operating company will accept your BTC or ETH if the law penalizes its use. It does not matter the quality of the technology, its safety, security and stability. If it is banned, it is no longer there.

And it’s not a specific issue just for autocratic China and its Communist Party, which has long shown its suspicion of cryptography.

cryptocurrency irs
Image credit: Fortune

The United States has also fired its own salvations, with Treasury submitting a proposal to make it mandatory for all cryptographic transactions in excess of the $ 10,000 value, which will be reported to the Internal Ingredient Service (IRS).

What good is it now for your encryption and secrecy, if the government can demand the necessary information at will?

When you file your taxes in the United States, you are already asked if you have participated in any virtual transactions and you are now asked to report the accumulated capital gains from the cryptocurrency trade. Yes, keeping your prized digital assets includes a tax bill in the currency of trust that is so boring.

To make matters worse, it is your responsibility to track the actual market value of each transaction you have made and calculate your tax liability or face legal consequences.

It is only a matter of time before the rest of the world does the same (the EU is also working on its own regulatory framework).

It turns out, therefore, that despite all the promises of independence from national authorities, cryptocurrencies cannot really escape them. Even worse, they can burden you with a bureaucracy you didn’t even know existed.

Of course, you can “technically” keep your Bitcoin in an encrypted private wallet and not disclose it to anyone, trying to show politicians and tax collectors your middle finger.

But if you do (most of us won’t, let’s be honest), you run the risk of breaking the law. If you ever want to change stakes for fiat, the information will appear somewhere and leave you with not only a tax bill, but also a painful penalty.

Direct transactions won’t keep you safe either, especially if other countries follow China’s example and restrict the use of non-public digital currencies, which can make the contents of your wallet quite useless during the process.

This leads us to another threat: uncertainty about the future legal status of any cryptocurrency in any country in the world.

It will impact the value of your digital currencies

Each piece of legislation directly affects current and future demand.

Given the lack of obvious technical advantages (currently cryptocurrencies are more expensive and slower to conduct transactions, especially for BTC) and incentives for use in illicit activities and tax evasion, it is likely that most of governments introduce additional regulations, which will impact the value of your cryptographic holdings.

elon musk bitcoin
Image credit: Fox Business

If you think Elon Musk was bad (when all he had to do to shake up the whole market is post a few tweets), think about the consequences of real laws that directly restrict the use of digital currencies.

Parliaments are still unsure of how to react to this new technology and, unlike China, where the party sees it as a possible challenge to control power, will proceed with caution.

Ultimately, they will have to establish stricter rules on the use of decentralized cryptography, whether they like it or not, because they will not be allowed to maintain any challenge to government control. And the world’s leading superpowers are clearly interested in showing who is really at the forefront.

Featured Image Credit: Blocktempo





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