Governments around the world are increasingly interested in how digital currencies like Bitcoin work. There are many benefits to understanding how these currencies operate, including new opportunities for financial inclusion and greater oversight over financial markets. Government agencies have different reasons for wanting to understand how Bitcoin trades operate. Some want to track capital movements and identify money laundering risks. Others want to understand the mechanics of Cryptocurrencies in general, so they can create new types of currency that better meet the needs of citizens.
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And some governments are exploring ways that digital assets can be used as a medium of exchange that is more resistant to price fluctuations than fiat currencies. Read on for more about what governmental agencies have discovered about Bitcoin trading, and how it can benefit their work.
Bitcoin as a Medium of Exchange.
Digital currencies like Bitcoin can be useful as a medium of exchange, especially when combined with advanced digital banking services. Bitcoin offers a relatively low level of transaction fees compared to traditional currencies, making it convenient for small purchases. And because Bitcoin uses a decentralized network and cryptography, it’s difficult for one person or entity to control or manipulate the value of a Bitcoin without the approval of the majority of users. This makes it an attractive option for online retailers and individuals with geographic restrictions on their transactions.
Financial Inclusion through Cryptocurrency Trading.
Digital currencies like Bitcoin can also make it easier for more people to participate in financial services. Because digital assets like Bitcoin are easy to transfer and store using exchanges like Bitcoin Smarter. You can use them to exchange money with others who don’t have access to traditional financial services. This can help expand access to financial services to populations that are often overlooked by banks, including people living in remote areas and low-income populations. Bitcoin can also be useful for making tax payments and donating money to charity because it can be used without a third party like a bank or charity managing the transaction. This means that people in remote areas, for example, can receive donations without being able to easily send money themselves.
Streamlining Financial Oversight and Regulations.
The ability to track and trace capital movements with digital assets like Bitcoin can be particularly helpful for financial oversight and regulation. As governments are increasingly focused on how digital assets like Bitcoin operate and create new financial tools like cryptocurrency exchanges, it can be much easier to track and trace transactions and identify potential illicit activities. This can help reduce fraud and money laundering in financial services, as well as help governments, identify tax evaders and other financial criminals who might try to use virtual currencies to avoid detection by authorities.
Digital currencies like Bitcoin can also be useful in areas where there are strict foreign exchange controls, allowing citizens to conduct business and send money overseas even if they don’t have access to traditional banking services.
More Oversight over Financial Markets
In many ways, the most powerful reason for governments to understand how digital currencies like Bitcoin work is to get a better understanding of financial markets more broadly. Bitcoin and other digital assets like them are largely decentralized and operate outside of traditional financial regulatory frameworks. This means that regulation is largely a matter of self-regulation by the sector itself. But in some cases, regulators have begun to investigate digital assets to understand how they might be used in more dangerous ways.
For example, in July 2018, the Securities and Exchange Commission (SEC) announced that it is investigating the trading of securities based on the price movements of digital assets. The SEC has said that this is an area of interest because of the lack of transparency in digital asset trading and the potential for fraud and manipulation.
Track & Trace Capital Movements with Ledgers.
While many of the benefits of Cryptocurrencies like Bitcoin are tied to how they operate in a financial context, there are also benefits for understanding how they work on a technical level. Cryptographic algorithms and distributed ledger technology like the blockchain that underpins Bitcoin is increasingly being applied to other applications, providing new opportunities for technical innovation.
For instance, blockchain can be used to create smart contracts that can automate transactions like rental agreements and make contracts like mortgages more easily enforceable. In the future, it may be possible to track and trace financial transactions in a similar way to how digital assets like Bitcoin are now. This could open up new opportunities for financial inclusion and more direct oversight of financial markets.
Conclusion.
Bitcoin trading presents many benefits for governments by enabling the tracking and tracing of capital movements, streamlining financial oversight and regulations, and making it easier for more people to participate in financial services. These benefits are particularly significant when paired with the cryptocurrency itself, which is difficult to control and makes it difficult to track and trace illegal activities. This makes it a useful tool for governments looking to track and trace capital movements, track down financial criminals and track and trace financial transactions.
