Why the bitcoin may be nearing its end

Is much-hyped 'bitcoin' nearing its end? Yes, says an article inBloomberg.

[caption id="attachment_1149833" align="alignleft" width="380"] Bitcoins. AFP[/caption]

Basing his contentions on history, Stephen Mihm, a history professor at the University of Georgia, hasillustrated how private currencies of yore flourished for a while before being crushed by government forces. The growth of private minting was possible due to the inability of the kings and governments to provide enough small change to allow for daily transactions.

Quoting from "Good Money,"a book by economic historian George Selgin, the article says during the industrial revolutionBritish "industrialists minted their own cash in far greater quantities and at a cheaper price than the government itself could muster. The right to "make money" was most definitely not in the exclusive hands of the government at this time."

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Eventually though, politicians working towards consolidated unions came to view these varied monies as a threat to unified nations and national markets. Mihm writes, "Advocates of a more powerful central government came to view a common, state-issued currency as a valuable tool for accomplishing a host of nationalist projects, from collecting taxes to influencing economic conditions by controlling the money supply. The creation of central banks was but a further extension of this logic, giving nation-states even further control over the currency."

If the past is anything to go by, world governments and financial institutions will not hesitate in upping the ante to eliminate possible threats posed by bitcoins and its buddies. Perhaps someone should bring bitcoin supporters up to speed.

The RBI had recently cautioned that though it may not regulate use of bitcoins, users should be aware of the legal, financial and operational risks they are exposing themselves to. Following the RBI's advice, several India bitcoin operators temporarily or permanently suspended their operations.

Read the entire Bloombergarticle here.