“Governments will not be able to cope with the scale of tax evasion and criminal activity that will result in the recognition of digital currencies as a legitimate means of payment. But history shows that they tend to adopt and supervise private market inventions.“
This is stated by Professor Kenneth Rogoff, an economist at Harvard University.
The professor wondered if the Bitcoin exchange rate would not be the world’s busiest bubble today, or whether it would be an excellent investment whose financial technology could change the world.
He replied that in the long term, the technology would certainly work but that the Bitcoin could collapse.
For those who have not taken the Bitcoin course in recent years, let us recall that its price has increased more than 600% last year and more than 1 600% in the last two years. At the end of the week, the Bitcoin rate was about $ 5,800. A unit of the coin is now worth more than three times an ounce of gold. The proponents of the currency expect it to increase still further, even in the next few years.
The professor points out that all this will depend heavily on the reactions of governments. Will it make sure to ignore the anonymous payment mechanism that is also used for tax evasion and crime? Will they create their own digital currency? And on the other hand, will the virtual currencies competing with Bitcoin succeed in penetrating the market?
On the other hand, regulation in the world is far from uniform. For example, Japan has decided to treat Bitcoin as a legal means of payment in the hope that it will become an international center of Fintech.
On the other hand, the Chinese government, worried about Bitcoin’s role in the flight of state capital and tax evasion, decided to withdraw the law from the foreign exchange market.
The United States has taken symbolic measures to regulate Bitcoin, but it is not yet clear how Washington intends to move forward.
Silicon Valley executives invest capital in Bitcoin and rival currencies.
After Bitcoin, the most important numerical currency is Ethereum. Its creators aspire to use its technology to allow users to write “intelligent contracts” in every possible field.
At the beginning of October, the etheric market value was $ 28 billion, compared with $ 72 billion for the Bitcoin.
Most experts agree that the technology behind digital currencies provides many opportunities in the field of cybersecurity, which is particularly crucial for the stability of the global financial system.
It is obvious that the goal of the developers was not that the Bitcoin does not replace the dollar as an international currency, but rather to create a cheap and secure payment mechanism.
Professor Rogoff adds that “it would be a mistake to think that the Bitcoin will ever replace any currency issued by a central bank. Governments that allow anonymous transactions in digital currencies are one thing, if not desirable. But authorizing large-scale anonymous transactions is a completely different story. Governments simply will not be able to cope with the scale of tax evasion and criminal activity. Of course, governments that print high-value bills may also increase tax evasion and criminal activity. But money, unlike digital currencies, is at least palpable. “
In Japan, the government has already suggested that it will force the Bitcoin Trade Arena to locate criminal activity and collect information on account holders on the site. However, the citizens of the country could buy Bitcoin outside Japan and then launder it into Japanese accounts.
Japan is likely to become a Swiss-type tax haven, and there is no need for banking secrecy as it is an integral part of digital currency technology.
Thus, if one took away the anonymity promised by Bitcoin, it would be difficult to justify its current price. Unless there are still a number of rogue states that allow the anonymous use of Bitcoin, or that governments like North Korea continue to play an increasing role in this market.
￼The professor concludes, “Ultimately, it is difficult to understand why central banks issue their own digital pieces and use regulation to influence the market until they win. The long history of currencies tells us that governments tend to adopt and then supervise private market inventions. It is impossible to predict the value the Bitcoin will achieve in the next two years, but there is no reason to believe that his destiny will be different.