November 10, 2022

Government Rules That Restrict Bitcoin

The government is forcing some problems in legalizing bitcoin for reasons like the absence of central authority. As a result, bitcoin prices are not much stable if we compare them to the dollar, Euro, or pound. Bitcoin uses an independent base blockchain to record and hold bitcoin transactions. Blockchain is an immutable ledger that records and tracks assets and business networks. We can use the blockchain to store copyrights, intellectual property, patents, and branding information. Also, other personal information about business partners and their accounts can be stored using blockchain. So, if you are planning to trade Bitcoin, you may consider knowing about the Bitcoin Philosophy.

A restriction by the government on bitcoin does not mean that the government is not interested in the digital concept. On the contrary, the government is interested in the digital payment world, and this is the benefit to the government by which the government can impose better tax rules on the use of bitcoin as a mode of payment. For example, Bitcoin is now legally used by citizens of El Salvador but does not replace the dominance of the U.S. dollar in import-export markets. On the other hand, Russia is using bitcoin for its energy exports and as a highly liquid and growing asset for their economy and fiat currency. It shows that bitcoin can potentially push digital payments and the world economy. Still, the thing is, it has to become legalized and entirely under the control of the government.

Government restrictions on bitcoin

Government losses the capital control

After the legalization of bitcoin, it will create the chances of less capital control by the government. The government can’t control the flow of money from one source to another because bitcoin supports the anonymous movement of money. Control of capital is a must. If the outflow of currency takes place anonymously, it can cause a debase in the value of exports. 

An economy like China has set a limit for its citizens to use foreign currency of $50000 a year. Citizens can use not more than 50000 to control the outflow of capital. According to a study, more than $49 billion moved out of the Chinese bitcoin wallets to other countries’ wallets at the end of 2020. It means that Chinese citizens have converted local currency into virtual currency, bitcoin, and moved it out of the country anonymously without the government. This movement took place because bitcoin supports the anonymous movement of money. The Chinese government is restricting the use of cryptocurrency due to the loss of capital control by the government and less tax collection. 

Connection of bitcoin to illegal activity

Terrorists use Bitcoin to receive money from their source, which is in their native country. The use of bitcoin is continuously rising and also in illegal activities, thus helping terrorism to grow. The ability to bypass the sanction on receiving payments overseas and from the domestic country makes bitcoin less trustworthy than fiat currency. The government does not have any control over bitcoin transactions. Bitcoin transactions are untraceable. One can’t trace the transactions or identify the user behind the address. Thus, creating less trusted digital transactions.

Silk Road is the most hyped crime case that has used bitcoin for payment transfer. Silk Road is a marketplace used to do illegal activities like dealing in guns, drugs, etc. bitcoin and other cryptocurrencies were used to transfer the funds. The use of crypto has made it difficult enforcement of law due to unknown parties who are transferring the funds. However, in the end, the FBI entered the marketplace, took it down, and seized about 174,000 BTC in illegal activity.


Bitcoin is not regulated by any solid central authority that can be further used as proof of transaction and to record the address from where the transaction took place, which transferred funds, and to whom it was sent. These questions always remain silent while using bitcoin. We always hear that bitcoin is used for payment purposes, but bitcoin payments are still in their infancy because it is still used for investment purposes. 

Due to the absence of any regulatory authority, there are always cases of hacking and cyber-attacks faced by bitcoin investors. Also, the prices of bitcoin are not regulated by any supervising authority, due to which the price of bitcoin shows price volatility. 


There are several more sanctions that the government applies on bitcoin. Bitcoin payments and investment lack government standards, and the government is warring to make bitcoin a legal tender. Only a few countries use bitcoin to make and receive payments and make only a few transactions because bitcoin does not offer price stability and trust like fiat currency. If you are considering using bitcoin for your transactions, you must be aware of the following drawbacks.

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