By adopting Bitcoin as a legal currency, countries are decoupling economics from politics.
Bitcoin is the opposite of fiat currencies and hence its value.
The battle of central banks to prevent Bitcoin from becoming a global currency is far from over, and we may not even have seen all of its artillery yet. Why do I say this? Well, for a very simple reason: we will now begin to see the consequences of the Bitcoin economy in countries like El Salvador or the Central African Republic, and central banks and other financial authorities will not like the scenario, because it will directly affect their can.
Or rather: change is already bothering them. When El Salvador made the decision a year ago to become the first country in the world to adopt bitcoin as a legal currency, the International Monetary Fund (IMF) shouted out. Now that a second country has adopted bitcoin into its monetary system, financial regulators in that region and once again the International Monetary Fund are uncomfortable with the decision..
The Central African Republic recently allowed Bitcoin to be used as currency, a law that appears to have met with poor taste among the authorities of the Central African Economic and Monetary Community (CEMAC). Through this community’s central bank, BEAC, the organization wrote to the president noting that Bitcoin adoption represented a risk to “monetary stability” in the entire region.
Under the argument that the adoption of Bitcoin could have a negative impact on African countries that are members of CEMAC, the authority accused the Central African Republic of “creating a currency outside the control of the central bank.” A phrase that may sound illegal and reprehensible in the mouth of politicians, but in practice it should not be a concern, rather it is the ultimate goal of Bitcoin.
Yes, one of the benefits of using bitcoin as a legal currency is that it makes central banks obsolete, and their role in running the state is very political because they are part of the state. is called, While a country adopts Bitcoin, it declares that it is separating the national economy from political power Hence, the aspirations and needs of the alternate group. In this way, citizens will not have to worry about changes in power and decisions made by politicians in the leadership.
The death of central finance
If we are clear about the principles of Bitcoin and the way it functions as a monetary system, it is understandable why entities like BEAC feel threatened by approving cryptocurrency as legal tender. First of all: Bitcoin is a decentralized technology, and therefore it does not need third parties to issue its units, let alone regulate them.
Under this banner Bitcoin turns out to be the complete opposite of fiat currency. The dollar, the euro, the yen, and any other currency minted by the country, is money issued by the central bank. This entity is responsible for defining the regulations of the monetary system, regulating its use and ensuring its distribution. All this in a centralized manner, with the authorization of a person and the work of a leadership very close to the governmental authority.
As a result, the said central system is prone to vices, because central banks are not completely independent of government decisions that are made in the country. in this way, Measures and changes to the monetary system can be introduced to benefit political goals at the moment or enrich the dome.
An example is the printing of inorganic money. This practice is common among central banks in different parts of the world and is approved by the government, as it has decided to distribute more capital to cover the debts of the state. A measure that generates inflation problems, increases the impoverishment of citizens and weakens the national economy. The most dangerous thing about this is that it is a method used by many entities around the world, with more than 60% of the world’s population experiencing double-digit inflation in their home markets.
in this way, For a country to adopt bitcoin is a step to root out these vices. Being a decentralized currency, whose monetary policies are established from the very beginning in a protocol and programmed to automate its operation, it is impossible for a centralized entity to change the units that will be issued. Any change to the Bitcoin code must first be submitted to the consensus of all members of the community, who ensure the value of the coin and the proper operation of the network.
As if that weren’t enough, given the origin of Bitcoin is deflation. That is, it has a monetary policy where it is stated that the supply of currency will be limited, in addition, it will decrease in a programmed manner over time. This is one of the most popular features in the bitcoiner community, as it aims to prevent users’ capital from squandering through random issuance of units and increases the likelihood of them being revalued due to their scarcity.
In addition to all of the above too It is very difficult for a central entity such as a central bank to regulate Bitcoin transactions or modify their data. Processing any information within the Bitcoin network is a community activity that relies on participating in Proof of Work (PoW), an activity that anyone with a computer, mining equipment, and internet connection can do.
As a result, the central bank of a country cannot be the only entity responsible for monitoring network transactions, as it loses its powers as a regulator of the monetary system. Likewise, Bitcoin resists censorship, because its operation makes it difficult to block transactions or capital. In addition, it is immutable, since the method of its creation prevents any member of the network from changing the information stored there.
As we can see, this makes Bitcoin a powerful monetary system capable of reducing abuse of power. Under this perspective, it is inevitable to point out In the Bitcoin economy, central banks are losing their sense of existence. Since Bitcoin is issued and self-regulating without the need for third party intervention, there is no need for a central financial body to impose regulations on a country’s monetary system. Because of this, these authorities will have to change themselves to adapt their functions to the new economic reality or simply disappear due to their obsolescence.
Taking all this into consideration: How will central banks not feel threatened by adopting bitcoin and complain about these actions? It’s a very normal situation when your days are numbered. We all kick our feet in the water when we drown, which is why I think we’re just beginning to see the first reactions of these entities to Bitcoin’s increasingly crystallized future.
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