Bitcoin: Understated benefits and overstated risks

As the world’s first decentralized digital currency, Bitcoin worries policymakers. Voicing concerns over this digital currency—or cryptocurrency—officials cite its potential for facilitating money-laundering, making illicit purchases, evading taxes, and financing terrorism. Less often discussed, but equally important, are the potential benefits that Bitcoin may provide.

In fact, a new study released by the Mercatus Center, “Bitcoin: A Primer for Policymakers,” details some of the innovative applications in the Bitcoin economy that the public debate may not fully appreciate. Before regulators rush to mitigate anticipated harm, they should first understand how this technology works and how it can improve lives.

First, Bitcoin is a promising way to lower transaction costs. Credit card companies charge merchant fees that are often prohibitively expensive for small businesses. Small-business owners face the hard trade-off of either refusing to accept credit card payments and losing business or accepting card payments and losing money by eating the costs. Transaction fees with Bitcoin are negligible and can save money for cost-conscious businesses.

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