- Advantages of crypto,
- Which countries have banned crypto,
- Why governments fear crypto.
As much as cryptocurrencies are being adopted, in some countries owning, buying and trading with digital currency has been banned and here is why.
Over the years Cryptocurrency gained popularity mainly because it is decentralized, meaning that it has no regulator and all power is distributed away from any central authority(the government through the central bank) and that presents a threat to their control over the economy.
Firstly, the government wants you to keep your money in the bank, banks primarily make money by borrowing from depositors and compensating them with a certain interest rate and security for their money then lending it out to borrowers hence making a profit from the interest rate spread. Also, banks make money from nun-funded income or non-interest income which is income derived from fees such as deposit fees, transaction fees, credit card fees etc.
Now if everyone keeps their money in their electronic devices as crypto and withdraw their money, the bank will be left without a source of revenue to finances loan applications and their non-interest income will be greatly reduced as fewer people will be using their services.
The amount of money deposited into banks is also used to calculate growth domestic product (GDP), which is used to assess the progress and development of an individual country. For developing countries, the GDP growth rate is essential to meet the growing needs of a population, framing policies and is also used by investors in investment decision making. As more people adopt the use of crypto, the GDP will fall therefore negatively affecting the government.
Governments are also afraid of cryptos because it is untraceable, they will have no idea what is going on? The bank can only track down your first purchase of the digital money because it is transferred from your bank account, after that they will have no idea of what people have bought, who they bought it from, where they bought it from and how much it cost, therefore, creating a threat to their power.
Hence, the use of crypto could also give rise to illegal money activities as money will be exchanged in plain sight but no one will ever know or trace the money.
Countries that have raised a red flag on crypto include china, Saudi Arabia, Ecuador, Island. In Russia, you can trade and keep your money as crypto, but you cannot make payments for goods and services with the currency.