Many people believe that a cryptocurrency created by a government will inherently be better than one created by a developer, but there is very little in the way of proof that this theory is true. There are already a handful of these cryptos out there, and they have all been total flops so far – not one has a decent trade volume. The issue here all stems from trust – people use cryptos as a form of payment due to the lack of trust or flexibility government-controlled currencies give them.
Controlling How You Spend
Despite the fact it’s packaged as a cryptocurrency, most government-backed cryptos are just digital tokens that they control – essentially no different from fiat. Governments will have greater control over where you spend your new money and will scrutinize where it came from – similarly to fiat currencies. Banks and governments already block payments to companies that are deemed not appropriate, and this same level of censorship is also applied to these government-backed cryptos.
Only Use Cases So Far Are Poor Examples
Unfortunately, the only government-backed cryptocurrencies that are in circulation at the moment are genuinely poor examples of how to create a government-backed crypto. The most prominent one is the Petro – a crypto built by Nicolas Maduro to circumvent US sanctions. Venezuela had a raft of trade sanctions placed on it by the US and this stifled its ability to generate money. The government then created the Petro in order to bypass these sanctions, but it’s simply not working due to the tokenomics.
Using the case of the Petro again, these government backed cryptos simply don’t make any economic sense. The Petro is allegedly pegged to the value of a basket of commodities – 50% oil, 20% iron, 20% gold, and 10% diamonds. If you can do the math of that when you’re at the till waiting to pay with your cryptos, then we salute you. This just highlights how the tokenomics of government-backed cryptos simply don’t make sense or match up.
Developers Have No Alternative Plans in Mind
People are more likely to trust a cryptocurrency network like Bitcoin, Ethereum, or Monero simply due to the fact its decentralized – meaning nobody controls anything. In these trustless ecosystems, people are free to spend their money exactly as they please, without fears of banks cancelling their payments. This is something governments can’t replicate, as they have alternate desires and motives for creating a cryptocurrency.
To cut a long story short, people crave a decentralized ecosystem whereby their transactions aren’t judged by banks and censored by governments. Most governments currently looking into cryptos are doing so in order to skirt around political issues. It will be a long time before we see a government create a genuine crypto that has real value in a decentralized world.