Bitcoin: Biggest Threat to US Financial System

in crytocurrency •  2 years ago 
Financial regulators including the Treasury department, the Federal Reserve and the Securities and Exchange Commission are claiming that cryptocurrencies like Bitcoin are among the biggest threats to the US financial system. Given that they are used to having control of the currency and can issue debt as they see fit - it's easy to see why the prospect of losing that control to the distributed ledger system is leaving them shaking their boots and putting crytocurrencies under intense scrutiny.


Because distributed ledger systems are still relatively new , regulators believe that they are open to vulnerabilities that may not fully reveal themselves until they are deployed on a larger scale. As such, crypto enthusiast are concerned about regulator's interference due to fears by the government that crytocurrency is the medium of choice for terrorists and criminals.

Financial Stability Oversight Council, say “regulators will need to adapt to the changing market structure” if bitcoin-like systems ultimately reduce the importance of traditional centralized intermediaries. "Since the set of market participants which makes use of a distributed ledger system may well span regulatory jurisdictions or national boundaries, a considerable degree of co-ordination among regulators may be required to effectively identify and address risks associated with distributed ledger systems,” it said.

Personally - I believe that we are going to see the end of centralized banking and cryptocurrency will take over as the new world reserve currency. As people are waking up to the fact that our current financial system is built on an unstable house of cards - it is only a matter of time before the U.S dollar becomes worthless - and ultimately the rest of the world's fiat debt based currency will meet the same fate. As the Fed continues printing more money and putting the country further into debt, while simultaneously ending out 10x more money than they actually have on the books - it is simply a matter of time now before it all comes crashing down. As they issue more currency, the existing currency is watered down and every dollar issued has less purchasing power- in a nutshell.. it means your bag of chips gets smaller and the price of it goes up.

Even China and Russia can see the writing on the wall and are stocking up on physical gold - positioning themselves to be world reserve currency when the dollar can no longer stand under it own weight. However, that might not work in their favor either as recent reports have indicated that many commodities brokers may actually be selling more gold than they own . Because many gold and silver investors don't actually take physical position of it- they may potentially be buying the same piece of gold that has already been sold to 3 or more people at the same time. If more gold is sold than exists - it can lead to dire consequences. If investors and speculators start to demand their gold - there could be a physical run on gold that forces the price of it to skyrocket to stratospheric heights - this could have the effect of devaluing currencies around the world. However, many countries do not base their currency on the gold standard anymore- but it could collapse the gold market and mining industry as it becomes to expensive to obtain.


And what will we use for money when the dollar has no value? We will look for other things to trade and so far bitcoin and other alt-coins are establishing themselves as strong contenders for alternate currency. After all - currency only has value because people agree that it does. If people agree that cryptocurrency has value and are willing to trade it then the marketplace can use it as a legitimate currency. Advocates for digital currency think it can improve the efficiency and transparency of currency systems but FSOC officials noted that bitcoin had experienced “dramatic” increases in trade delays and some transaction failures in recent months.

Though cryptocurrency is designed with fraud prevention in mind, the regulators noted that “some systems may be vulnerable to fraud executed through collusion among a significant fraction of participants in the system”.

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The key factor for any currency (including crypto) is how widely it is adopted (accepted) and how easy it is for regular public to use it for circulation, including converting to and from other forms of assets, currencies etc. The governments cannot stop this technology anymore but they can severely impact usability by blocking entry points. When they feel threatened enough, making it illegal and shutting down the exchanges will cut off majority of users who could otherwise form a critical mass. For example, imagine it outlawed today. A regular person with some bank accounts and credit cards - (all of which are monitored and reported) cannot really use any of it. Physical exchange for goods and assets is problematic if local exchanges will become illegal. Then what? Anybody has an opinion on how it might play out?

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