Bitcoin is the primary and the most prominent form of digital currency first introduced in 2009. The introduction of Bitcoin has attracted the interest and attention of several investors across the globe. Being a completely online mode of transaction, Bitcoin offers certain advantages and risks to its users. Due to some of its features, Bitcoin has not been accepted legally by the governments of several nations.
- Bitcoin and Blockchain:
The digital currency Bitcoin is powered by the Blockchain that records the transactions on the server in a distributed ledger.
- Bitcoin miners compete against one another to finish a complex mathematical question through high tech computer devices.
- Once the miners successfully solve the puzzle, transactions get authenticated, and a new block gets added with the previous block of data. Miners are awarded a small number of Bitcoins upon verifying transactions.
- The Bitcoin ledger needs security against frauds through a system that has well-maintained security. After repeated theft cases, the workers of Bitcoin have improved the security network, and ever since then, the number of fraud cases have gone down drastically. Trading Bitcoin can be highly chaotic for a beginner. Click to bitcoin era to learn few techniques on trading.
- After the invention of Bitcoin, Blockchain technology emerged as a separate concept, and thousands of Blockchain were built by cryptographic programs. Blockchain for business utilizes a shared and unchangeable ledger that no one can access without the member’s permission.
- Blockchain enhances transparency into any system by building trust and instant traceability, so most sectors use them.
- What makes Bitcoin illegal?
Governments across the globe are still not ready to come to terms with Bitcoin.
- Bitcoin can bypass government inflicted capital controls – governments mostly imposed capital controls to cease outflows of a currency because exports can degrade its worth. It is a technique adopted by the government to exert control on economic and fiscal regulations. Blockchain powers Bitcoin, which is entirely decentralized and cannot be controlled by any central organizations. Thus, the government has no control over it and its transactions.
- Illegal activities – the ability to circumvent the government regulations allows criminals to carry on with frauds hiding in disguise. The network of Bitcoin is pseudonymous, and users are recognized only through their server address. It is challenging to identify users behind any criminal activity due to this reason. There have been several fraud cases in the past. One of the most famous is the Silk Road case. Silk Road was a market for illegal weapons that accepted payments in Bitcoins. The digital currency was held in bond until the buyer confirmed receipts of the purchases he made.
- Bitcoin cannot be regulated – even after years of its invention, government agencies are trying to figure out a way to bring the cryptocurrency under their control. For example, if anyone has faced a fraud case, then they cannot go to any higher authority and file the complaint due to the lack of regulations of Bitcoin. Also, the price of any digital currency is heavily volatile, and no one can predict its value. Its volatility has led investors to lose their money and faith in it.
- Tax evasion – Bitcoin can evade tax as there is an unclear mapping from coins to the users. Governments around the globe are unable to impose a tax on digital currency because the address that leads to the users cannot trace their nationality.
- Countries that have declared Bitcoin illegal:
- Algeria – currently, Algeria has passed a financial law prohibiting the use of any cryptocurrency as a legal mode of transaction or possessing it as a virtual asset.
- Bolivia – since 2014, Bolivia has put full restrictions on the use of Bitcoin.
- China – the nation prohibited the use of Bitcoin and can take strict steps against anyone who does not abide by their law.
Bitcoin is a unique mode of transaction and has a good store of value but, certain features lead to its ban in many nations.