Nation states and cryptocurrencies

News, whether fake or true, consistently filters through of nation states either banning Bitcoin or creating their own centralised cryptocurrency. But why do both stories appear so often?

Bitcoin has proven itself extremely resilient over the years. Whilst the recent collapse in price may suggest otherwise, the currency is still vastly in profit for those who got in before the peak 2017 bull run. On top of this, the currency has experienced extremely little downtime in its ten-year life span. For many citizens in oppressive regimes, the temptation is there to look at Bitcoin as a safe haven from their own currencies controlled by sometimes inept and corrupt leaders.

Perhaps this is why countries such as Iran or India are consistently in the news regarding potential bans on Bitcoin. Sadly for these nations, any ban of Bitcoin would have a minimal effect. Whilst it could cause further price depression, the actual network of Bitcoin would continue unscathed. A ban on Bitcoin worldwide might not even necessarily work either. In the same way the War on Drugs continues to this day with little to show for it, Bitcoin would continue to survive.

Commentators such as Max Keiser have argued that nations such as Iran or Russia who are under sanctions from the US should look at using Bitcoin to escape these sanctions, as the cryptocurrency is outside the traditional financial system.

However, using a currency not under state control doesn’t sound too attractive to those in power. Instead, we hear news that they are interested in creating their own nation state cryptocurrency akin to the Petro, Venezuela’s terrible attempt at a nation-backed cryptocurrency.

What these countries fail to realise though is that such centralised cryptocurrencies don’t offer much above and beyond their traditional currencies except that they are digital. Even this doesn’t necessarily mean it is better than what they already have.

If nation states are to use cryptocurrencies, then trusting in the network of Bitcoin rather than creating a dodgy knock-off would suit their purposes much better.