The bitcoin revolution may have set in motion a chain of events that will eventually lead to the introduction of many private currencies in the years to come, according to a new report from a leading economic think-tank.
The Institute of Economic Affairs (IEA) is speculating in a report entitled “New Private Monies, A Bit-Part Player?” that the success of bitcoin and the public demand and interest in it may result in some healthy competition for the digital currency market – perhaps even fiat currencies, like the United States dollar and euro.
The IEA report indicates that the driving force behind this demand is because some “wish to hold private currencies in the expectation that they will not diminish in purchasing power as state money has; some wish to conduct illegal activity; some wish to be part of a movement increasing the state control of economic and personal behavior and others just want better money.”
Whatever the case may be, there is no doubt that bitcoin and other similar digital currencies are all set to change the current economic paradigm. A key reason for bitcoin’s success is the fact that it is currently not controlled by the government or banks. This is in sharp contrast with traditional money since that is completely controlled by banks who in turn maintain a very close relationship with the government. This has been a major source of disillusionment for customers since they are the ones who continue to pay interest to these banks.
The bitcoin community argues that customers gain a major advantage with bitcoin, such as offering powerful security features and provide both privacy and transparency.
The IEA report predicts that cryptocurrencies are here to stay and should in fact be embraced as they can play an important role in upholding the free market ideology. It also highlights that bitcoins have seen tremendous growth mainly because they are not regulated. This should not be altered and the government should stay away from this market and let the industry regulate itself.
It further adds that it believes that there is a need to repeal regressive regulation against private currency to ensure that courts enforce contracts with this currency and to not put this currency at any tax disadvantage relative to the conventional currency market.
The emphasis is on providing cryptocurrencies a level playing field. There is no doubt many private currencies will be introduced, but with time inevitably the market will even itself out. Many virtual currencies will likely fizzle out but the top ones will remain and will play an important role in the economy.
As long as the government and banks take it in stride and not take on an aggressive approach, crypotcurrency could bring about a positive change to this market. Instead of undermining its potential, banks should instead welcome the competition.