Why are Cryptocurrencies banned in certain countries?

I believe it is safe to say that it is hard to imagine our lives without technology. The role of technology in our lives is of utmost importance. Almost every aspect of our life is somehow dependent on technology. From communication to something as simple as ordering groceries, technology is certainly impacting our daily activities.

In the past few years, we have surely witnessed technology evolving more and more. In wake of this evolution, technology has also paved the path for the development of cryptocurrency. But what exactly is cryptocurrency? It is a type of digital or virtual currency which only exists on an electronic platform. As opposed to conventional currencies, there is no bill or coin that represents a cryptocurrency. Bitcoin, Ethereum, Stellar Lumen are among the most popular cryptocurrencies.

Most cryptocurrencies are decentralized networks that are based on blockchain technology. A blockchain is a list of records (blocks) that are continuously growing. These blocks, in turn, are linked and secured through cryptography. While cryptocurrencies certainly offer some advantages, such as more confidentiality during payment and easier international trade, their shortcomings definitely outweigh their benefits.

In fact, these shortcomings are the reason why many countries have imposed a ban on cryptocurrencies. A major shortcoming is that cryptocurrencies are not government-regulated. Cryptocurrencies are not assured by the government and there is no scope for third-party interference. If a user stores cryptocurrency with a particular company and the company is hacked or goes out of business, the government has no moral obligation to step in and get the user’s money back.

Moreover, cryptocurrencies can be used as a medium of carrying out various illegal practices like money laundering and fraud as well. Payments through crypto are irreversible unless the receiver sends the money back. This puts the users in an extremely vulnerable position. In addition to this, as a digital platform, crypto users are also susceptible to cybersecurity breaches and may even fall into the hands of hackers.

Furthermore, Russian cybersecurity firm Kaspersky has also issued a warning regarding a steep increase in Bitcoin theft in 2021. According to the firm, the pandemic may lead to a downfall of some economies and real-world currencies, which will make Bitcoin theft “a lot more attractive". “We should expect more fraud, targeting mostly BTC, due to this cryptocurrency being the most popular one” the firm stated.

In 2020, global crypto exchanges, including KuCoin and Eterbase, reportedly suffered high-profile hacks. While attackers stole $280 million from Seychelles-based KuCoin, the Eterbase attackers made off with cryptocurrency worth $5.4 million. In August of 2020, 2gether ( a crypto trading app ) suffered a €1.2 million hack, while Bitcoin worth $3.1 million was stolen from crypto-friendly neo-bank Cashaa in July 2020.

Many governments have stated that a ban on cryptocurrencies is essential in order to safeguard the interest of people.

Moving on, it is no secret that a government would not like to give up its control over a major sector of the economy. According to many experts, in the mere future, crypto is going to establish itself as a major part of the economy. In contrast to the conventional currencies, which the governments have major and full control over, the governments are in no power to control crypto. This could also be one of the reasons why major governments have induced a ban on cryptocurrencies.

It can be said that cryptocurrencies are best known for their feature of being decentralized. However, the creators of some currencies still control the flow and amount of some currencies in the market. Coins can also be manipulated by the holders for large swings in their price. Even hugely traded coins have been susceptible to these manipulations like Bitcoin, whose value doubled several times in 2017. This has proved to be a major cause of losses for the users.

Although Bitcoin is now almost 10 years old, it has put major countries in the midst of a dilemma. The decentralized and anonymous nature of Bitcoin has presented a major challenge for many governments on how to allow legal use while preventing criminal transactions. China, Russia, Vietnam, Colombia are some of the countries that have imposed a ban on cryptocurrencies.

While major countries like the United States, Canada, France, and Italy have not induced a ban on crypto, they have numerous government-affiliated agencies which constantly monitor and regulate the presence of illegal transactions through crypto.

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