No one should be shocked Bitcoin’s price fell after the United States recovered most of the cryptocurrency used to pay the Colonial Pipeline hackers, an analyst with GlobalData said this week.
Given cryptocurrency’s libertarian roots, the fact a government could track and seize money designed to be free of centralized control has upset some and contributed to the price decline, thematic analyst Danyaal Rashid said.
“It is no surprise the price of Bitcoin fell by around 10 percent after the news of this ransom recovery,” Rashid said. “Slowly we are beginning to see disruption of the key selling points of cryptocurrencies as a sort of reality check, as their security is compromised. Bitcoin was supposed to liberate us from government control: decentralized and out of the government’s hands. The fact that the US Government has managed to recover most of this ransom, despite it being paid in Bitcoin, goes directly against this. It is impossible to argue that the cryptocurrency is completely decentralized and free from government control when a state entity can seize it – even when the accounts are held outside of their country.”
While an early knock against cryptocurrencies was they would be a haven for criminal elements, recent data does not support that claim. This incident could further discourage criminals, Rashid suggested.
“Previously, one of the criticisms of cryptocurrencies by government has been their adoption by criminals. The irony is that this story goes to show that the very openness and traceability of cryptocurrencies may actually make it more difficult for criminals to operate. Despite this, this seizure may have opened a can of worms that changes the way that people fundamentally view cryptocurrencies from now on. No longer are they untouchable assets.”
There are valuable lessons bot good and worrisome to be learned from this action that must be factored into the debate on central bank digital currencies.
“In fact, to the contrary, they are some of the easiest assets to trace, meaning that government can step in and recover funds,” Rashid said. “However, this also means there is the potential for governments to dictate what cryptocurrencies can be used for and so disrupt any payments that go against this, effectively leading them to be controlled in much the same way as fiat currencies.”
