Why bitcoin's success could be its downfall

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70NEWSJAPAN - National governments tolerate bitcoin and other forms of cryptocurrency because these currencies are still bit players in the global economy. Bangladesh, Bolivia and Kyrgyzstan are among the handful of countries to have banned bitcoin transactions. The United States, Japan, the European Union and other governments have discussed stricter controls, but most seem to be taking a wait-and-see approach to regulation.

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Most countries allow citizens to buy and spend digital currencies. In the United States, some stores and restaurants accept bitcoin as payment, and there are even some bitcoin ATMs. Increasingly, however, people are buying into bitcoin less to use as currency and more as an investment, hoping that bitcoin will continue to increase (bubble?) in value. Many fewer trades involve the actual purchase of goods or services, and converting large amounts of bitcoin in dollars can still be tricky.

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For now, currencies like bitcoin are too volatile to be used for long-term saving or lending — this means they won’t readily replace dollars or euros. But governments cannot control the movement of digital currencies across borders — and that’s why these currencies already pose a threat. Digital currencies can provide a means to evade government restrictions on currency exchange and capital outflows.