The Major Handicap of Cryptocurrencies

Cryptocurrencies have a significant handicap when it comes to being adopted for regular usage in commercial transactions – the answers so far to the question “why should anyone want them” have been inadequate.

If you’re a speculator and want to bet on the price of the currency going up, then you already have the answer you want, but that has nothing to do with regular commercial transactions.

If you want freedom from government control over money, that’s fine, but you’ve just subtracted the one and only factor that makes fiat currencies accepted.

Governments who issue their own currency will only accept that currency for the payment of taxes. Nothing else. If you try to give them gold bullion, they’ll refuse it. If you owe back taxes and don’t have any money, they’ll seize your property and have it sold at auction, keeping the portion owed and giving you back the rest (many people think keep all of the money from the sale, but they’re not that evil.). Either that or they’ll throw you in jail. Or maybe both?

It’s this threat of force – having your property and/or your freedom taken away from you – that makes people want the currency that the Government created. They need it so that they can rent their freedom.

Banks create money

Some people might point out that banks create money and that everyone uses that. This is true, but the money that banks create is credit, and this credit is your claim on the Government-created money that the bank has in their ATM’s or in their reserve accounts at the central bank. If everyone tries to withdraw all of their money from a commercial bank, the bank won’t have enough Government-created money to satisfy those claims and will go out of business, which is an issue that regulators are trying to deal with.

What if taxes could be paid with STEEM?

If a monetary sovereign government accepted someone else’s currency for the payment of taxes, then their own currency may possibly no longer be used in the economy. This would mean that government spending would rely entirely on their ability to get the other currency, which is no different from going back to the failed system of the gold standard.

However, not all governments are monetary sovereigns. Sub-national governments (state and local level) don’t issue the national currency, but are allowed to accept other currencies for the payment of taxes or rates (disclaimer: permission to do this may vary in jurisdictions around the World). Some of them have started issuing their own community currencies.

The bottom line

Whether or not it’s a good idea for a government to accept a cryptocurrency for taxes/rates is another matter. The fact of the matter is this - so long as governments use the threat of force to back their currencies, crypto will never displace them. Either that or crypto's need to leverage the governments threat of force.

Maybe I'm wrong and there's another way. Let me know in the comments.