Crypto currency gets a lot of attention because they can change the way we handle money. It simply makes it decentralized and easy to use worldwide. But why do governments of big countries look at it as a concern?
In this Article , we will know why governments are concerned about cryptocurrencies. We will discuss the issues which the government has with them. Like how they are used for illegal activities and the problems they can create to traditional money systems.
Let’s understand why governments are very careful. Let’s get a clearer picture of the relationship between governments and cryptocurrencies.
How Cryptocurrency Hit Regulatory bodies and Government Control
Cryptocurrencies operate outside the traditional banking system, which creates a variety of challenges for regulatory bodies . Traditional financial institutions like banks or credit unions are regulated by governments while cryptocurrencies are decentralized and operated on blockchain technology.
This means that there is no central authority or governing body to keep watch on cryptocurrency transactions. As a result, governments can not monitor and enforce regulations in the cryptocurrency market.
Cryptocurrencies are decentralized but it also poses major challenges for law enforcement agencies when fighting illegal activities. This involves activities like money laundering and terror financing.
Also Read: Taxation in United States of America 2024
The Concerns of Government About Crypto Currency
Governments have various concerns when talking about Crypto Currency. Primarily due to its contribution to illegal activities. The anonymity of these cryptocurrencies contribute to hiding information about money laundering and terrorism.
Governments are worried about the impact of Crypto Currency on tax collection and other monetary policies. It can disturb monetary policies as the pseudonymous nature of transactions. It not only complicates tax enforcement but also threatens to disrupt traditional systems.
The transactions can be conducted without any restriction of the border and it can also not be tracked to identify the criminals who are involved in illegal activities.
Contribution in revenue loss for government due to tax evasion and avoidance
Imagine there’s a small business owner who’ name is Sarah. She sells handmade crafts online. Sarah accepts payments for her crafts in cryptocurrency, which she then holds in her digital wallet.
Cryptocurrency transactions are pseudonymous and decentralized so Sarah decides to avoid reporting her earnings from craft sales to the tax authorities.
As a result, Sarah evades paying taxes on her income. This led to a loss of tax revenue for the government. If there are a large number of people like Sarah then this will dramatically contribute to revenue loss for the government.
Conclusion
As a proud citizen, it is our duty to understand the stance of the government as it is vital. They deal with different regulatory challenges, criminal activities and monitory scams. To protect the consumers and maintain the financial stability, effective regulations are mandatory.