Technical issues in the acceptance of bitcoin as currency in Nations Banks

Introduction

Bitcoins were invented as a Bitcoin Boom that does not have any centralization and is not governed by any particular body. This created a sense of an independent currency unaffected by the governance of any political or social body. It is different from tangible assets and currency because the value of any tangible currency or asset is decided by the government. A piece of paper is of some value because the government has declared that it does. In the case of cryptocurrencies, especially bitcoins, that is not the scenario. It is a non-tangible digital asset whose value completely depends on factors independent of any governance. Bitcoins and their usage have attracted the attention of not only investors but also various governments because of the revolutionary concept behind them. It is almost like a nonconformist asset to own! Therefore, for obvious reasons, the governments of various nations are apprehensive about its use and storage. Bitcoins are given the recognition of an ‘alternative currency’ but its acceptance as a mainstream currency seems to be a distant dream. 

Reasons for Bitcoins not Being an Acceptable Currency in National Banks

Several reasons can be traced as to why Bitcoins are still not the fiat or traditional currency used by banks or other official transactional operations. A few of them are being noted and explained below:

• People’s Trust: Fiat currency earns its credibility from the government. It is a tangible currency that has earned its trust because the government has backed up with its trust and credibility. With digital currencies like bitcoins, one cannot buy food items, gold, silver or even a pack of smokes but with fiat currencies, one can exchange it with necessary items. Therefore fiat currencies have earned more credibility and trust among the common people.
• Governmental Control: Fiat currencies are completely controlled by the government. Issuing or destroying currency is the prerogative of the government itself. The primary agency of the government to control the flow of fiat currency are the banks. Therefore, the tool used to manage and trace currency is chiefly monetary policies. These are essential tools to control the economy of a nation. But as already mentioned, digital currencies like Bitcoins do not fall under the scope or limitations of any monetary policy. Therefore the government cannot control the flow or trace the investments in Bitcoins. Control over currency has many impacts like control of crime, business environment, economic movement etc. Since Bitcoins fall outside the scope of the same, it is not accepted as an official currency in national banks.
• Disrupting Fiscal Policies of the Government: The fiscal policies are created by the government to restrict or increase the circulation of money in an economic system. For employment generation, avoid inflation or recession in an economy that might be predicted to go out of hand. Fiscal policies have no control over this alternative currency source therefore it sometimes disrupts the policy and clashes with it. Therefore Bitcoins are rejected as a primary currency in any national bank.
• Employment: In return for the services that are offered by a bank, there are service charges levied which creates an additional pool of currency for generating employment for bankers. This employment generation is absent in any parallel digital form of currency. ‘Miners’ are present in cyberspace who crack complicated and advanced level algorithms to enable buyers and sellers to trade this currency. As a service charge, they are paid in the digital currency itself. This too becomes a hindrance in the process of generating traditional employment and tracing the service charge as a part of the economic system. This is another major reason why banks don’t accept bitcoins as a formal payment medium.
• Criminal activities: Any parallel or untraceable economic activity can be easily used for funding antisocial activities and crimes. Bitcoins have also carried the blame for the same. Crimes like drug abuse, child and women trafficking, illegal ammunition supply, all have been claimed to be having aid and funding from bitcoins.

This ambiguity also makes the banks refrain from accepting it as an official currency. The government will never want to be involved in such illegal activities.