Since the introduction of Bitcoin (BTCUSD) in 2008, controversy and developments have been created in the world. Many people considered the launch of digital currency as the emergence of a new and fair monetary system. But many governments have problems with digital currency.
Critics of digital currencies point to the role of cryptocurrency in criminal activities and its lack of legal recognition. It is clear that governments around the world are cautiously watching the development of Bitcoin and digital currencies. Some governments, such as El Salvador, have adopted Bitcoin as a currency. But major economies, including the United States, do not recognize it as legal tender.
To understand why governments are wary of Bitcoin, it is important to understand the role of fiat currencies in a country's economy. Fiat refers to conventional currencies issued by governments. Fiat money is backed by the full faith and credit of a government. The US government relies on the Federal Reserve (a central bank over which Congress has only partial powers) to print or create money for its economy. In the chain of trust between the parties of the transaction, the Federal Reserve is the last link in this chain. Proponents of digital currencies believe that fiat money is not backed by tangible assets. By manipulating the money supply in the U.S. economy, the central bank also produces asset bubbles and crises, they say. Governments facilitate the role of central banks in the economy. Central banks are involved in the adoption of policies related to money, but they do not have the authority to regulate its use. This responsibility rests with the government. Governments distribute and regulate the flow and use of money in the economy through a series of intermediaries such as banks and financial institutions. Thus, they can track how money is transferred, the sectors where it is distributed, and its users. Governments also earn money through personal and corporate income taxes.