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How Bitcoin Helps People Bypass Government Currency Control


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How Bitcoin Helps People Bypass Government Currency Control
By Rahul Gupta | Updated November 16, 2015 AAA |

Amidst the dysfunctional currency controls imposed by some governments across the world (i.e. Argentina, Cyprus, Venezuela, Iran etc), the virtual, cryptographic and de-centralized currency Bitcoin offers a new payment system which aims to empower people in carrying out cross currency transactions in a confidential manner free from any restrictions.

Let us have a look at how Bitcoin can bypass government controls:-

Seamless secure transactions to bypass exchange controls

This can be already seen in Venezuela, where due to strict economic currency controls, acquiring dollars locally and paying for online dollar transactions is a daunting task. The only option left with people in such a case is the black market which the government believes contributes to inflation and shortages. Bitcoin is helping people bypass exchange controls and carry out simple dollar transactions smoothly.

Avoid the situation of currency “taxation”

As evidenced by case of the small island of Cyprus, the government was considering deposit tax and outright confiscation of some portion of deposits to save the monetary system from collapse in lieu of the huge impending Euro loan.

Further, for a government deep in debt, printing more money may seem to be the only viable option however this leads to inflationary pressures. Inflation can also be thought of as a means of currency taxation which erodes the real value of savings and deposits kept in Banks.

Bitcoin by the virtue of being free from government controls can help overcome both these problems. Since the amount of Bitcoin currency in circulation is fixed, it is not materially affected by inflation as it cannot be printed indiscriminately and since there is no central regulating body, no deposit taxes can be applied arbitrarily.
Removing the need for intermediaries

Since Bitcoin system facilitates a peer to peer anonymous payment mechanism, it eliminates the need for third party payment processing intermediaries. This makes it harder for the government to track down individual transactions, gather personal information from these intermediaries and tax such financial transactions. In sum, it leads to lesser government controls over online transactions.
Decentralization of payment system

Since the medium for processing Bitcoin payment is the Internet which transcends national boundaries, no central authority or bank has ultimate control over the currency. By offering itself as a viable alternative to hard currency it stirs up a healthy debate on whether there exists a need for centralized authorities like central banks to govern currency transactions across the world.

The Bottom Line

Bitcoin has proven to be a useful alternative as a means to bypass unreasonable and arbitrary government controls over free exchange conversions. It has value as a virtual currency in times of hyperinflation as the supply of Bitcoin is fixed. Moreover, it eliminates the need for middlemen in financial transactions making the overall ecosystem more cost effective. As Bitcoin gains further popularity, governments across the world will try to control Bitcoin exchange through regulations. Ultimately the success of the Bitcoin system lies in finding a middle-path by preserving the benefits of Bitcoins without disrupting the existing system in totality.