Nowadays, the clash between Bitcoin and central banks becomes so apparent. As a decentralized instrument, Bitcoin provokes the hegemony of regulatory organs and it gains power with the help of investors. The reaction of central banks is to limit the range of actions that can be taken by Blockchain technology and Bitcoin. The result of the war can be unpredictable now; however, things will get dirtier for sure.
Most people argue that there will be eventually a government intervention in the Bitcoin system. Harvard Professor of Economics and former chief economist at the International Monetary Fund (IMF) Kenneth Rogoff is one of those people and he goes even further by claiming that central banks won’t allow bitcoin and other cryptocurrencies to become mainstream.
When he was asked to name the reason why Bitcoin has performed very well in recent weeks, he addressed the lack of interest rate on Bitcoin tokens. Zero interest rates can lead to a lot of funny asset valuations and that is certainly a part of the rise of Bitcoin. He also pointed out confidence pumped by wealthy people and finance experts who explained their support on the social media platforms.
The lack of strict regulations to control Bitcoin trading has also been questioned by the market especially after the recent increase in BTC price and its market cap. According to him, the regulators are all over it and the Bank for International Settlements (BIS), the G7, and the G20 are all monitoring the cryptocurrency. What they could not find yet is how to control the process without hurting the main principles of the financial markets. “Every central bank is looking at this and trying to decide what to do,” he told.
He also emphasized that Bitcoin is still not a threat for central banks because of its scope of use. He compared Bitcoin to modern art by saying that it does not represent the whole picture and is far away from being mainstream. “As it really starts to compete with ordinary, fiat currencies, government currencies, I think they’ll clamp down on it like a ton of bricks.” he added.
Another argument going around the discussion is that it becomes more difficult to regulate Bitcoin due to its growing acceptance as a legitimate means of payment. Rogoff said that regulating is not difficult at all and the government just does not want to block innovation in the crypto space. This innovation trend is also beneficial for the government in the next steps.
Finally, professor Rogoff warned: “But make no mistake, the governments need to retain control over taxation, controlling crime, etc. They need to maintain control over the unit of account — the currency. Yes, private innovation can come out for a while, but eventually, over the long course of history, the government first regulates and then it appropriates, and I think we can see that happening here.”
