It seems like no matter how the government tries to regulate and inhibit the capabilities of cryptocurrencies, they simply cannot get it out of the heads of crypto enthusiasts in their respective countries.
In most cases, the introduction of crypto regulations was intended to somehow convince investors that it’s not a good idea to own cryptocurrencies. Things such as safety, the use of crypto for crime, etc. were usually used as an argument to discredit these digital assets.
Why? Because it’s an additional headache that the governments doesn’t want to deal with. Hence, might as well restrain it in the ramifications of a specific regulation, so that the whole thing is on autopilot and a small government branch can take care of it.
The counter-argument for this is usually that if governments wanted to avoid the headache they simply wouldn’t even touch cryptocurrencies in the first place. Although I’m a deliberate supporter of regulating cryptocurrencies for the safety and profitability of the investors, I simply can’t deny that the reasons behind or the formulation of legislation is sometimes very misinformed.
Another reason why regulation is a good thing for cryptocurrencies is that it adds it a lot more “popularity” among the country’s population. In the past, only a few private companies would even consider advertising their crypto offerings. But now, since the governments have started drafting legislation (which requires media coverage) the number of people aware of the blockchain has increased.
And that’s why we’re here. Let’s find out why a government installed regulation is guaranteed to entice people towards cryptocurrencies rather than away from them. And here are some examples of why.
Australia’s cash cap
Australia has had some issues with cryptocurrencies in the past but they became even more apparent when the $10,000 cash cap was introduced in 2019.
The regulation on the maximum amount of cash people could pay without a bank notice did affect the number of small businesses that rely on cash payments to keep their company going. Adding a 1-2 hour detour for those payments is definitely not something a business owner would want in their already hectic detour, which is why most simply switched to digital banking (thus exposing themselves to days of waiting as well as large fees).
Furthermore, the new law forced quite a lot of Australian wagering fans to abandon their offline venues and start looking for online ones simply because they were now not guaranteed the security of their identity.
The reason why people want to hide their identity while wagering is because banks look at it as a hazardous hobby, thus decreasing the person’s credit score.
Because of this, large players started to quickly transition to online Aussie VIP casinos that accepted cryptocurrencies. Why cryptocurrencies? Because they could very easily hide their identities by using things such as privacy tokens. Using regular cryptocurrencies would be a lot more traceable and identifiable, therefore that wouldn’t make any sense.
While trying to digitalise the local economy through online banking, the Australian government inadvertently promoted the idea of using cryptocurrencies which were much cheaper and faster than regular means of moving funds.
Georgia’s refinancing rate
Another example of enticing a population to deal with cryptocurrencies was with the Republic of Georgia.
Over the course of just 2 weeks, the government had hiked refinancing rates by 2% for the local currency. This meant that people who had already taken out a loan had immediately had their interest rates increased.
Considering that the country is still developing, banks were the only way to raise funds for an investment, meaning that the 2% hike was quite substantial for small businesses and forced them to speed up the development.
Newcomers to the local business market were much more discouraged from taking out a loan considering how much interest they’d have to pay for it. Therefore they reached out to methods such as foreign fundraisers and crypto P2P loans.
The idea of lending cryptocurrencies was introduced in the country around two months ago when a new company was founded from an already existing mining corporation.
Due to unaffiliation with the banking system and a grey market for cryptocurrencies, the company was able to offer much more enticing interest rates on loans. Things such as 2% were sometimes the case. The only difference was: the lower the loan, the larger the interest rate. Which meant that it was more tailored towards businesses.
It’s already been a week since the rates were hiked and the company had reported a 200% increase in borrowers, thus introducing a whole new generation of businessmen to the idea of cryptocurrencies.
The regulation was not even being considered in the past, but the popularity that the refinancing rates caused will most likely require it, thus further expanding the knowledge of the blockchain and its popularity among the local population.
Another example is Venezuela who already has more problems than it can handle. These financial problems that were caused by the hyperinflation were somehow mitigated when the Dash cryptocurrency first appeared on the market.
It’s adoption to the SMS system managed to make it one of the most popular mediums of exchange in the country as people did not rely on the local currency anymore. Furthermore, due to sanctions from the United States, it was impossible to receive transactions in USD from the US, thus leaving a lot of people with relatives abroad devoid of their help.
With Dash, there was a small group of merchants that used it to purchase raw materials and then sell it to their customers. The popularity was growing steadily and it seemed it would encompass the whole country.
In order to prevent this, the Venezuelan government released its own cryptocurrency called Petro. Due to its initial unpopularity within the Venezuelan population, the government made a ruling that most salaries, as well as pensions, would be paid in crypto with future plans to make it an official currency in the country.
This forced the population to adopt Dash even faster, thus allowing the popularity of the coin to grow much more quickly than it was already growing.
In the end, the government simply shot itself in the foot by forcing a state-issued crypto onto their citizens.