The Global Politics of Bitcoin
Erin Araneta
Tech Writer
Since its creation in 2008, Bitcoin has made waves in the global community for its innovation as a decentralized digital currency, facilitating online transactions and providing banking alternatives for those with limited access to financial services. However, with its volatility because of fluctuating price and demand and varying regulations around the world, Bitcoin has sparked international debate over its use and legitimacy as a form of currency. Notably, multiple governments have responded to the use of Bitcoin within their countries uniquely, from implementation of the cryptocurrency to monitored regulation to outright restrictions and bans. Each government’s response and use of Bitcoin directly reflects their own economic stability and approach to government control over the economy.
Some countries have fully embraced the use of Bitcoin within their countries, viewing cryptocurrency as a means to encourage financial stability and innovative growth. In 2021, El Salvador became the first country to accept Bitcoin as legal tender, with President Nayib Bukele promoting the use of Bitcoin to improve the El Salvadorian economy and make banking easier for citizens. Chivo (meaning “cool” in Salvadorian slang), a digital wallet designed by the government of El Salvador, increases the accessibility of Bitcoin for El Salvadorians, showcasing the trust the government places in the cryptocurrency in improving the economy of the Central American nation. Additionally, El Salvador has added Bitcoin to its national reserve.
Not all countries have fully embraced Bitcoin, however. Several nations regulate, tax, and monitor Bitcoin as an asset rather than a currency. These governments are weary of the risks Bitcoin poses to financial security. As a form of virtual currency, Bitcoin transactions pose cybersecurity risks, are susceptible to fraud, and are commonly targeted by hackers. With these risks in mind, many governments have taken steps to regulate cryptocurrency trading in hopes of protecting consumers and investors and monitoring the volatility of cryptocurrency, while still pushing for innovation. The European Union implemented the Markets in Crypto-Assets Regulation (MiCA) in 2024, a new regulatory framework for cryptocurrency use. Similarly, Japan has recognized Bitcoin as a form of payment but not as legal tender, putting into place several regulatory frameworks to monitor the use of Bitcoin, such as the Payment Services Act. In the United States, Bitcoin continues to be heavily regulated as it is considered property, not currency, and therefore is taxed. Several U.S. agencies have expanded their governmental roles to monitor the use of cryptocurrencies in the country, including the SEC, CFTC, and the IRS. Recently, President Trump signed an executive order establishing a government bitcoin reserve, signifying the country’s move towards acceptance of the cryptocurrency.
Other countries view cryptocurrencies as a threat to financial stability and government control. As a decentralized currency, Bitcoin eliminates the need for a central authority, causing governments that prioritize financial control to be cautious of Bitcoin because of its potential to undermine fiscal and monetary policies. For example, the Chinese government initially embraced the use of Bitcoin, but has since banned cryptocurrency transactions, citing concerns over financial fraud. As a potential threat to China’s centralized monetary system, the ban of Bitcoin in the country does not come as a surprise. While the Chinese government has banned Bitcoin, Chinese companies continue to use cryptocurrencies and underground training persists.
Some countries have even used Bitcoin to skirt sanctions, maintaining access to trade and global markets. Because of Bitcoin’s decentralized nature, transactions using it are more difficult to track and freeze. Bitcoin users also do not need approval from financial institutions for transactions across borders. Following its invasion of Ukraine in 2022, Russia has turned to cryptocurrency transactions to bypass Western sanctions and banking restrictions. Additionally, as U.S. sanctions have affected Iran’s economy, the country has used Bitcoin to generate revenue instead, using Bitcoin to pay for imports.
With its bipolar potential to simultaneously increase financial accessibility and undermine governmental control, Bitcoin’s global growth has prompted governments to take distinctive approaches to the cryptocurrency, shaping both technological and political industries around the world.
Contact Erin at erin.araneta@student.shu.edu