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Are There Any Setbacks for Making Bitcoin a Legal Tender?
El Salvador is the first country globally to make Bitcoin a legal tender, despite the coin’s enormous popularity. Yet, surprisingly, countries like China are openly against Bitcoin becoming a legal tender.
Bitcoin’s ultimate goal is to become a globally accepted financial system that could allow the exchange of goods and services, i.e., legal tender. However, the journey to Bitcoin becoming a legal tender continues to face a myriad of regulatory issues.
In the United States, The Financial Crimes Enforcement Network (FinCEN) doesn’t consider BTC a legal tender. Nonetheless, it categorizes Bitcoin exchanges as financial transmitters. In addition, the Internal Revenue Service (IRS) defines Bitcoin as a digital representation of value, a store of value, or a unit of account and has formulated tax guidance.
The United States has no coherent legislation surrounding BTC. While some states have legalized the use of Bitcoin, others have implemented strict laws against it. As such, Bitcoin faces several setbacks in becoming a legal tender in the U.S., These setbacks include:
Bitcoin, being a technology-based currency, suffers from technology hiccups such as network stability and scalability. The world’s number one crypto is built on blockchain technology and can suffer several technical challenges, compromising its functionality.
Blockchain can be slow and cumbersome at times. For instance, it requires recurrent software protocol updates to improve operations, rules, and communication between network nodes for optimal functionality.
The technological challenges that Bitcoin and other cryptocurrencies face are numerous. Setting robust systems for smooth and efficient functioning is critical for Bitcoin to become legal tender.
Intense price fluctuations make it almost impossible for BTC to become a legal tender. A currency should be at least stable in value to stand as a legal tender. Nobody would want to have 100 dollars now and have nothing in the next minute. The high volatility raises severe concerns about the possibility of it becoming legal tender.
Dwindling Trust in Bitcoin
The recent events surrounding Bitcoin, including China’s crackdown on Bitcoin mining activities, have significantly affected its reputation. Moreover, crypto has also been at the center of several scandalous occurrences in its history.
The infamous Silk Road used Bitcoin to fuel illegal transactions. Additionally, it enabled numerous data breaches that saw the theft of Bitcoins, such as the Mt. Gox hacking.
These and other infamous events have significantly tainted BTC’s image, hindering its mainstream acceptance. As such, it would be an uphill task to make it a legal tender, especially in the U.S., where the population trusts the dollar more than Bitcoin.
Lack of a Governing Body
For a currency to become a legal tender, a central authority should govern or oversee its operations. However, Bitcoin is a decentralized blockchain. Therefore, a centralized monetary body overseeing its transactions does not exist. Even more, the way Bitcoin exchanges operate is a significant setback in making it a legal tender.
Is BTC fit for Adoption as a Legal Tender?
Bitcoin has achieved widespread acceptance, with several international corporations buying and accepting it as a means of payment. However, digital currency is still years away from becoming a legal tender.
In the United States, lack of trust in Bitcoin, intense volatility, legal issues, and technology challenges are decisive setbacks in making Bitcoin a legal tender. Will the U.S ever follow the step of El Salvador and make Bitcoin a legal tender? Only time will tell.