Will Bitcoin be Shut Down?
I've been asked this question so much over the last few weeks, that I am starting to feel like I should have an answer. I honestly have no clue.
So, as usual, I turn to someone I believe does have a clue. Let's hear from Prasheel - the Cryptowallah - once again...
To always staying informed,
Rahul Shah (Research Analyst)
The world of bitcoin, rarely free of wild ups and downs, was spooked last week over news that South Korea is preparing to ban trading in virtual currencies like bitcoin.
It didn't happen. In fact, the country's cryptocurrency task force later put out a statement saying there were no plans to ban cryptocurrencies. Nevertheless, the bitcoin market was shaken up by the news.
After all, the most popular bitcoin exchanges in South Korea process hundreds of millions of dollars' worth of transactions every day.
Trades using the Korean Won account for around 5% of the global bitcoin volume.
Regulators Grow Wary
While the South Korean Government is the latest to voice its concerns about cryptos, and even consider an outright ban on their trading, it is not the only one.
Regulators all over the world have begun to grapple with the challenges presented by virtual currencies that mostly bypass regulated banks, financial firms, exchanges and central clearinghouses.
The Chinese government is taking an aggressive stance against bitcoin and other cryptos. After banning ICOs (initial coin offerings) - which are somewhat like IPOs but not regulated - the Chinese government now plans to go after bitcoin miners. China holds the majority of bitcoin mining power, owing to its cheap and subsidized electricity, which miners tap into.
In the US too, there have been attempts by the Securities and Exchange Commission (SEC) to regulate bitcoin and cryptos. The SEC sent out a flurry of announcements in the last few months on the subject, including some strong statements against crypto trading by the SEC chairman.
In India, the Reserve Bank of India (RBI) has periodically reiterated its concerns over cryptocurrencies since 2013. The RBI has cautioned users, holders, and traders on the risk of these currencies and clarified that it has not given any license or authorisation to any entity or company to operate such schemes or deals.
Although the RBI advises caution on its use, bitcoin is still not outright illegal or banned in India. But a lack of regulatory framework, makes it unclear.
Its legality is ambiguous.
While countries like Japan have taken a progressive approach to bitcoin by embracing and allowing its use as legal tender, most governments around the world have grown wary of bitcoin, and are trying to regulate or even shut down bitcoin and cryptocurrencies in general.
Will Bitcoin Shut Down Then?
Regulators are wary of bitcoin. And people are fearful that it could be shut down completely.
While a valid concern, that is extremely unlikely.
Governments and regulatory bodies seem to lack understanding of technological topics in general, and bitcoin in particular.
There are several key components to bitcoin and other cryptocurrencies, which make them successful as methods of transaction, and stores of value.
They're easy to transfer, no middle-man is required, and they can't be linked to owners who don't want to be identified.
These are all big problems for any government wanting greater control on its citizens.
The obvious challenge - bitcoin is decentralized.
Bitcoin is not linked to any territory or financial institution. There is no central point of focus for shutting it down. Without a central point of focus any meaningful crackdown would have to be a global endeavour.
And let's face it, the world is not good at cooperation.
Even if a country was able to prevent bitcoin transactions from taking place within its borders, tools like proxy servers and VPNs would allow users to operate internationally without much hassle.
All governments can do to inhibit bitcoin trading is to limit or diminish user's ability to 'cash out', that is to convert bitcoin into actual money.
But, of course, users could still convert bitcoin into other cryptos and then cash out. Moreover, if bitcoin does gain acceptance as a 'currency' going forward, users won't ever really feel the need to cash out.
Blockchain > Bitcoin
In the unlikely event that bitcoin is 'shut down', blockchain - the technology that bitcoin is based on - will continue to live on. In fact, governments across the world, as well as major corporations have begun embracing the blockchain technology.
In India, SBI and 27 other banks joined hands to form BankChain - that harnesses the blockchain technology - to enable smart contracts and store KYC details.
I don't know for sure if bitcoin or any other cryptocurrency for that matter will survive in the long run.
But blockchain is here to stay.
Blockchain is bigger than bitcoin itself. Sure, bitcoin made the idea popular, but now that it's popular, it has begun disrupting traditional structures.
The cryptocurrency world is constantly evolving, with new developments in the technical space coming left right and center. My mentor, global crypto expert Tama Churchouse, and I are on a mission to keep you on top of the developments in the crypto world. And bring to you the best ideas and insights about the enigmatic world of cryptos.
Prasheel Vartak, The Cryptowallah
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