Benjamin A.T. Graham and Allison Kingsley write in the Washington Post about the inherent dangers of the success of Bitcoin, which is being seen even on our site, where we regularly cover stories of efforts by nations to regulate the emerging digital currency. In their article, they actually recognize what many new holders of Bitcoin might not recognize, that digital currency is a fundamental threat to governments, a fact I’ve also covered extensively on this site.
While their article recognizes the inherent danger in the success of Bitcoin, they fail to fully grasp that while Bitcoin might eventually become a digital currency that’s put to heel, it has started off a digital currency revolution that will not so easily be contained, and efforts by the state to regulate, or even criminalize digital currencies, will only help hasten the spreading and further development of black markets.
Digital currencies have been front-page news as the value of bitcoin, the most popular of the cryptocurrencies, continues to surge, albeit with wild fluctuations. Bitcoin backers argue that once digital currencies become widely used, governments will be unable to destroy them — users simply won’t allow it.
This view falls short on two points. First, digital currencies, even in their current form, are a bigger threat to national governments than most people currently understand.
Second, bitcoin’s success would also be its downfall. As bitcoin gains popularity, and especially if it stabilizes in value, it becomes a viable substitute for government-backed currencies. But national governments have little incentive to allow this type of direct competition…..
Our research shows that countries frequently impose currency restrictions for political and economic benefit. By restricting the conversion of their national currency into dollars, for instance, national governments can prevent investors from fleeing their economy too quickly.
Or governments can move to stabilize the national currency in times of crisis. The United Kingdom may well tinker with its currency exchanges to “manage” Brexit better domestically, for example. If citizens hold large bitcoin reserves, their holdings are effectively free from these types of traditional government restrictions on currency flows.
Read More at Washington Post