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It is understandable authorities are sweating about bitcoin because no central bank or regulator supervises the digital currency. The cryptocurrency, introduced in 2009, proffers lower transaction charges unlike conventional online payment systems. It is generated digitally using a computer. That process is called mining.

Fiat money refers to a currency which is considered a legal tender and supported by a government’s full faith. They regulate fiat currencies through central banks, which implement suitable monetary policies to achieve certain goals including full employment rate and low inflation. They are also responsible for ensuring stability of a country’s currency and its financial system. Since cryptocurrencies are decentralized, it may be much harder for authorities to oversee the cyber currency.

All dealings pertaining to a digital currency are done online and not traceable, making it easier for fraudsters to commit illegal acts such as human trafficking, prostitution, and terrorism. Case in point: Silk Route boss once thanked the existence of Bitcoin for the prosperity of their online drug market.

Bitcoin is kept and dealings take place between buyers and sellers without an intermediator. All transactions and verification processes are facilitated through the internet. In the event a country decides to adopt a cryptocurrency into their system, the banking system or central bank could become immaterial.

Let’s picture two situations here. In case a country decides to dissolve banks altogether, who will be responsible for resolving cyber crimes? For assisting digital currency users in case a technical glitch occurs? Without the physical presence of banks or institutions, no taxes will be collected, no jobs will be generated, and money transfer business will close eventually.

Government officials do not generally ascribe to cryptocurrencies as stability and security are not ensured. It will take time before authorities realize how bitcoin and the like can do to boost the economy.