What can governments do about cryptocurrency?

What can governments do about cryptocurrency?

Visa announced on Monday it'll be the first major electronic payments platform to accept some cryptocurrency to settle transactions on its network. The move is the latest sign of growing trust in such virtual currencies by mainstream financial institutions worldwide — and a development that presents big challenges for governments around the world.

But first, what is cryptocurrency? It's essentially like electronic cash — a computer file stored in a digital wallet that has value, and therefore can be used to buy goods and services from sellers that accept it as payment. Instead of going through a bank, transactions are settled on a virtual ledger or blockchain, which records all exchanges. You can acquire cryptocurrency by purchasing it with traditional money based on its market demand, or "mining" — a complex method that entails sharing computing power to help the blockchain process more and faster payments.

Now back to the politics. Indeed, for one of the world's top two electronic payment systems to accept currency not issued by governments is a very big deal for governments, which throughout most of history have enjoyed a monopoly on minting money. For states and especially central bankers, the seemingly unstoppable rise of cryptocurrency is a much bigger problem than Elon Musk saying you can pay for a Tesla with Bitcoin, the world's most well-known cryptocurrency.

Most governments fear that widespread virtual currency use will undercut their power to control the supply of money. (This explains the very strong pushback by the US Congress to Facebook's ultimately failed launch of its own cryptocurrency Libra less than two years ago.) While paper dollars, euros, yuan and the like are not going away anytime soon, cryptocurrency is clearly becoming more popular — with an estimated 106 million users worldwide. The question is then, what can governments do about it?

On the one hand, governments do have some legitimate reasons to want to ban or at least regulate cryptocurrencies. One is that the value of some cryptocurrencies has risen so much, so fast recently that experts fear another tech-driven bubble like the 2000 dot-com crisis, which sparked a mild recession in the US. Another is that cryptocurrency facilitates anonymous and untraceable transactions, so it can be used by criminals to buy and sell illegal goods and services as well as scam people.

Cryptocurrency mining can also be bad for the environment. The activity is so energy-intensive — and now widespread — that it currently consumes about 121.36 terawatt-hours of energy a year, more than the entire country of Argentina. With a lot of the mining taking place in low-income nations that get cheap electricity from fossil fuels, it can be as harmful as traditional mining. (Interestingly, much of the cryptocurrency mined in countries with weak environmental laws ends up in the wallets of buyers in green-minded wealthy nations, so regulation in the latter pushes more mining to the former.)

On the other hand, some governments are warming up to cryptocurrencies… as long as they are in charge. A good example is China, which has been trying for years to launch its digital yuan to compete with the US dollar, the world's dominant paper currency. Central banks issuing their own sovereign digital currencies would allow states to track every single transaction, something that appeals to both democratic nations to ensure tax compliance and to authoritarian ones for surveillance purposes.

Cryptocurrency is also a good tool for a small group of countries to bypass international EU and US sanctions. Russia and Venezuela have both launched their own digital currencies with that goal in mind, while Iran is rumored to be building an army of state-controlled miners to allow local companies to make payments circumventing the US-based SWIFT platform (which even money launderers rely on).

Bottom line. While cryptocurrency won't replace traditional money in the near term, or even ever, its increased acceptance presents massive challenges that governments can no longer put off dealing with.

Building on more than 15 years of sustainability leadership, Walmart is doubling down on addressing the growing climate crisis by targeting zero emissions across the company's global operations by 2040. Walmart and the Walmart Foundation are also committing to help protect, manage or restore at least 50 million acres of land and one million square miles of ocean by 2030 to help combat the cascading loss of nature threatening the planet.

One of the world's most famous political dissidents may die in a Russian prison this week.

Alexei Navalny has been on a hunger strike for almost three weeks over the authorities' refusal to let his own medical team examine him after he developed signs of tuberculosis. Now, one of his aides says Navalny is "close to death."

The fate of Vladimir Putin's most prominent critic — who was poisoned last summer, allegedly by state officials, treated in Germany, and then jailed upon his return to Russia — is being closely watched both inside and outside the country.

More Show less

Ian Bremmer and Bill Maher discussed the global leadership of the United States compared to that of China on a recent episode of Real Time. "The level of corruption in China, the level of corruption in China, even the buildings and the rails you talk about - the average building the Chinese build lasts for 20, 25 years. In the United States, it lasts for 40 to 50. There's a reason why we are still the world's most powerful country," Ian argued. "I'm just saying China's not eating our lunch - that's all."

More Show less

As the price of Bitcoin has skyrocketed in recent months, so has the amount of energy that procuring it hogs. Research shows that Bitcoin "mining" now uses 80 percent more energy than at the start of 2020. Billionaire philanthropist Bill Gates recently sounded the alarm on crypto, saying that he would not invest in Bitcoin because mining for the digital currency requires huge amounts of energy, much of which is powered by fossil fuels that harm the environment. So where does Bitcoin rank in electricity consumption compared to nations?

Even if the US, Europe, China, and India reduce carbon emissions at the rate they've promised, much climate damage has already been done. That shouldn't stop these and other countries from doing all they can to meet their net-zero emissions targets, but they also better start preparing for a world of people on the move.

Climate change will displace an unprecedented number of people in coming years, creating not just a series of humanitarian crises in many parts of the world, but lasting political, economic, and social upheaval as those of us who live on higher ground try to find a sustainable place for these climate refugees to live.

More Show less

Ian Bremmer's Quick Take:

Hi, everybody, Ian Bremmer here, kicking off your beautiful spring week from New York City. A little Quick Take. I thought I'd talk today about Russia, going to be in the news this week. Putin doesn't like it when they're out of the news for too long, certainly plenty going on between the US and Russia right now.

I'd say, first of all, to start off, the relationship is in the toilet. We know this. It is the worst it's been since the early '80s. That was true even under Trump. Trump and Putin personally had a pretty good relationship, but Trump wasn't able to get anything really done for the Russians, because both the Republicans in Congress, key members of cabinet under Trump, massive amount of constraints on what Trump could actually do, whether it's trying to bring Russia back into the G7 or recognize Crimea as a part of Russia, or remove or reduce sanctions. None of that actually got done. In fact, the relationship deteriorated over the four years.

But now we've got Biden and the focus is of course, more on human rights. The focus is more on climate change, which means that Russia as a massive energy exporter and particularly in terms of their influence on Eastern Europe and Western Europe on the downstream for gas delivery, for example, something that Biden is much more focused on. So a lot more pressure on the Russians, and the Russians don't care. Their willingness to hit back and show that the Americans are not willing to take any significant risks to constrain the Russians is also fairly significant. And this is playing out in a number of ways.

More Show less

Pakistani radicals vs French cartoons: It's been a tumultuous week in Lahore, Pakistan's second largest city. After widespread protests broke out across the Muslim world late last year after Paris defended French publications' rights to publish satirical images of the Prophet Mohamed, the radical Pakistani Islamist group Tehrik-i-Labaik Pakistan (TLP), gave Pakistan's government until April 20 to expel the French ambassador, when it had planned nationwide demonstrations. When Prime Minister Imran Khan refused to meet their demands, more violence erupted across the country and authorities arrested the TLP leader — prompting TLP supporters to hit back by kidnapping six state security personnel in Lahore this past weekend. Authorities have now banned the TLP outright and are bracing for more violence in the coming days. France, meanwhile, has urged all of its citizens to leave Pakistan.

More Show less

1,544: South African authorities say that at least 1,544 square miles of land has already been destroyed by wildfires in Cape Town. Landmarks including an African antiquities library at Cape Town university were gutted by the flames, while communities around the historic Table Mountain were evacuated as fire engulfed the area.

More Show less

Subscribe to GZERO Media's newsletter, Signal

The GZERO World Podcast with Ian Bremmer. Listen now.


Subscribe to GZERO Media's newsletter: Signal