The Government "Solution" to the Crypto "Problem"...You're Not Going to Like It!

Economists love to tout various reasons why governments won't adopt cryptos. Reasons why cryptos will never become a "real" currency. They'll say:

• These currencies are created out of thin air and are not real!
• They'll be used for money laundering!
• They will facilitate drug trade and other illegal activities!
• An internet outage would erase all your wealth!
  and my personal favorite:
• IT'S A BUBBLE!

Without pointing out the fallacies of the above reasons (this could turn into a long article if I attempted that!), governments would be much better off if they only embraced the new revolution in financial technology. This isn't some clever new accounting trick that hides losses or a different way to package up crappy, high-risk products and sell them as low-risk. Cryptos are a real way that individuals can get around having to pay a middle man for the pleasure of spending your own money. In most cases, cryptos are designed to be peer-to-peer instruments of transaction. Like fiat money, except it can't be printed into oblivion.

Taking out the idea that there are utility tokens, security tokens, and possibly a bunch of different other uses in the future, simply put...generalizing here...the governments are interested in the stores of value. The coins and tokens that would/will eventually be used for commerce. After all, if you want to know where a government's focus lies...follow the money!

That being said, a government could/will conceivably start transitioning to allowing crypto currencies to be used in lieu of their native currencies. In some small countries, this has already happened and cryptos are being widely accepted. So how can a government address the issues above in a way that benefits the country? If this revolution is going to take place anyway, governments will want to get out in front of it. After thinking about this a little bit, I came to what I believe would be the most likely solution that a government might enact:

----------NATIONALIZE THE EXCHANGES!----------

As much as I hate to see any industry nationalized by a government, I see this solution as addressing all the concerns the government might have.

If the country nationalized the exchanges, they would cut out the middleman and be able to squander all the transaction fees all by themselves! Additionally, they would be able to track all the transactions that take place in all the cryptocurrencies...not that they can't do it already thanks to blockchain technology, but it might give them a little warm fuzzy to know they can monitor it more easily. Maybe this would mean all exchanges would require us to input our tax ID or Social Security Numbers? I'm not sure how far they would want to take it.

Again, I hate the thought of the government running a function so vitally important as the crypto exchanges, but I think I could only accept this as a solution under a couple of conditions. 1) No income tax. If the government wants this piece of the pie and they collect the exchange fees on EVERY transaction, then I don't want to pay any additional income tax. 2) Transaction fees are CAPPED and can only be increased through legislation or MAYBE an increase on par with inflation. 3) Exchange neutrality...they cannot disrupt the function of the exchanges to serve a political purpose...that includes slowing down or speeding up transactions. 4) The government cannot alter the rate of inflation formula to serve any political purpose.

I KNOW this would be a bad idea. I KNOW it in my heart and soul...but as the governments lose control of the fiat money system and the transition to cryptos gains momentum, I could easily see SOME country's government using this strategy to gain control when the transition takes place.

You heard it here first, folks! Yet another reason to store your holdings offline!
-Randomness

Think I'm crazy? Think this could never happen? Let me know in the comments below.

Thumbnail Image Source: Coinstocks.com