Keep moving or die: Governments will need to adapt to cryptocurrency
Governments around the world are wrestling with how to handle the emergence of cryptocurrency as a competitor to fiat.
It is a serious problem for economies around the world. Some countries, like Morocco, Thailand, or Bolivia, are outright banning cryptocurrency while others are mulling over doing the same, like Russia and China. Other countries are more welcoming to cryptocurrency, but with hesitation; mostly moving forward with regulation, like Korea, the United States, and Japan. Then there are countries that don't seem to know what to do, like Australia and Canada.
When cryptocurrency eventually does emerge as the dominant form of value transfer, which of these countries will be better off? The countries who shunned cryptocurrency and its technological benefits for fear of its dangers, or the countries that moved to adapt to changing times?
In the near future, countries will need to quickly address problems like taxation and global movement of value beyond their control. Simply banning cryptocurrency is a knee-jerk reaction that will only serve to push those countries further behind the advancement of others. Instead, countries must look to innovate and think differently about currency. It will no longer be a tool that can be easily manipulated to turn on and off elements of the economy with brute force. Adaptation is the key to survival here. Governments have only one choice: move, or die.
What kinds of adaptations might work? Governments could start by working to understand the advantages of cryptocurrency - its inherent advantages such as its built-in scarcity, the fact it can not be counterfeited, and its capacity to be used to create smart contracts, to name a few. Smart contracts alone could potentially save billions in funds wasted on bureaucracy, if applied to numerous government programs. Government waste could be massively reduced. Cryptocurrency is a far more efficient method of transferring value and can be followed and verified in ways that cash simply can not be. In the future, so many innovations will be borne from the technology that can not even be imagined now.
It reminds me of Blockbuster Video. Here was this little known competitor called Netflix that comes along with the idea of just sending DVD's by mail instead of renting to customers in a brick and mortar store. Of course, later, Netflix developed the technology to stream shows directly into consumers' homes and is now a media giant. At one point in time, Blockbuster had the opportunity to purchase Netflix. Out of ignorance and fear, Blockbuster decided to instead shun the opportunity and go its own way.
...Sounds strangely familiar.
Good write up.
Governments that ban crypto are taking a naive view. They believe they can control their people, and therefore prevent crypto from invading their lands.
They're also probably politicians that are worried about their own financial positions.
Thanks! I agree, it's a knee-jerk reaction that will cost them in the long run.