The Federal Reserve System

Colin Baseman

The Federal Reserve representative Lael Brainard noted that half of the transactions made with the first cryptocurrency are associated with illegal activities. According to a Federal Reserve Board member, only a third of major exchanges request proof of identity from their users. And this is not an isolated case of criticism of bitcoin by US government agencies.

Trump vs Bitcoin

Us President Donald Trump also criticizes Bitcoin and Libra (a cryptocurrency created on the basis of Facebook). Moreover, the latter has already received the support of such well-known companies as MasterCard, VISA, and Ebay.

Official Washington gave legitimacy to crypto assets, noting the importance of bitcoin. However, instead of encouraging its use on a large scale, he declared a real "war" on the first crypto asset, promising stricter regulation.

It is no secret that cryptocurrencies cause certain concerns in the economic and financial circles of developed countries due to fears for the future of national currencies.

Donald Trump on Twitter attacked Bitcoin and Libra, stressing that there is only one currency in the US and that is the US dollar. The US President refers to the fact that Bitcoin or any other cryptocurrency can be used as a means of payment for illegal activities, including drug trafficking.

The reaction of the cryptocurrency community to such statements was quite expected. As a counterargument, users of crypto assets noted that the US dollar is not supported by anything at all.

Criticism of Bitcoin from the EU

Former ECB chief Jean-Claude Trichet also spoke negatively about Bitcoin and other cryptocurrencies. A well-known financier believes that cryptographic assets like Bitcoin will never become a "substitute" for real money. Representatives of Germany also criticized the crypto currency. According to financiers of one of the strongest economies in the Eurozone, coins cannot be a means of accumulation, and the so-called Stablecoin, are a direct threat to the existing currency system.

What does actually scare financiers and economists

The main reason why the authorities of many countries criticize the cryptocurrency is the impossibility of its control and influence on the exchange rate. Almost all officials do not hide this. The lack of control over the issue closes the possibility for Central banks to manipulate the money supply in order to regulate the economy.

The additional issue is a strong and until recently very effective tool in the hands of the Central Bank, with which Central banks control the level of inflation and provide some support for economic growth.

If Bitcoin is officially recognized as a means of payment, Central banks will lose their role as a regulatory body, as they will be left without the ability to independently enable the "printing press".

Criticism of Bitcoin as a means of accumulation also has a certain background. The fact is that in the modern economy and the policy of Central banks, all funds are thrown at the growth of consumption, due to which in the past it was possible to achieve economic expansion. Devaluation of money leads to inflation and encourages consumers to spend more, which in the end allows you to expand your business not only for existing companies, but also for startups in various industries.

Bitcoin or any other cryptocurrency can act as a means of accumulation. As a result, consumers, instead of spending money to purchase goods and services (and thus contribute to economic expansion), transfer funds to a new method of accumulation, which, at current levels of inflation, allows them not to spend, but to postpone with the prospect of making a profit in the future. Moreover, unlike bank deposits, the prospect of a new "dizzying" growth of bitcoin can be very serious.

What about bank deposits? At current deposit rates in the world's leading economies, keeping money on deposits is not profitable at all. By the way, it also stimulates consumption.

Since its creation and until 2017, the price of Bitcoin has increased by more than 20,000 times. The first adepts who decided to hold Bitcoin got rich. Such stories have prompted the emergence of new members of the cryptocurrency community who want to get big profits from storing cryptocurrency.

As a result, the policy of Central banks aimed at stimulating the economy by increasing consumption is completely useless. This is another reason for the Central Bank to criticize cryptocurrencies.

Another global cause for criticism is the conduct of illegal operations. This makes some sense, since the lack of control over Bitcoin really allows you to conduct illegal financial transactions with it, as well as hide from taxes. By the way, you can learn more about how things are with the taxation of cryptocurrencies in the article "Taxation of cryptocurrencies in the United States: fiscal service take on airdrops and forks."

Bitcoin use-cases

Despite criticism and attempts at regulation, the first cryptocurrency is already actively involved in the economic activities of many countries. The prospects for its further implementation are also optimistic.

Today, Bitcoin performs the following functions:

  1. Acts as a means of payment. Cryptocurrency is accepted by some online and offline stores, platforms that provide various forms of services, and Forex brokers. Well-known companies that work with Bitcoin include Ebay, Amazon, Microsoft, Dell, and Tesla.
  2. Saving storage. Bitcoin is also valuable as a means to store accumulated assets. The only drawback is the high volatility of the cryptocurrency. This disadvantage can be eliminated with the growth of liquidity and involvement.
  3. Investment and speculation. Bitcoin acts as a means to invest and profit from the difference in quotes. Given the significant volatility of the first cryptocurrency, as well as its rapid growth in recent years, Bitcoin has already been able to attract a significant number of financial market players.
  4. Business development. Recently, POS terminals and cards have appeared that allow businesses to accept bitcoins and significantly expand their business opportunities.
  5. Implementation of transactions. At the moment, there are known cases of using Bitcoin as a means of payment for concluding transactions between individuals. In particular, you can buy a house, car, and other items of movable and immovable property using cryptocurrency.
  6. Technology development. The Bitcoin network has given the world a new technology that many well-known companies in the field of IT and not only are trying to implement today.
  7. Initial Coin Offerings and development of startups. Bitcoin, along with other cryptocurrencies, is used to attract funds to startups and technology companies. Blockchain technology allows you to conduct fundraising campaigns, including for a completely legal and regulated, including in the United States, initial offer of STO security tokens.