Today, most customers are turning to cryptocurrencies and virtual money such as bitcoins to pay their staff or obtain larger returns on their economic ventures. Governments like South Korea and Japan see the untapped opportunity of generating government revenue by taxing digital currency (Helmore 2017). As a result, laws are being enacted to ensure that governments oversee the licensing and tax collecting processes as part of a fiscal policy aimed at boosting the country's economy by averting a potential bubble. However, based on the theory of Milton Friedman regarding monetary policies and free markets, the individual would oppose most of the propositions to regulate bitcoins because of government involvement and its role in causing inflation.
One of the reasons why Friedman would oppose the legalization of bitcoins is because a free market will increase money supply that leads to stability and increase in prices. In this regard, there is need to advance for deregulation and less government control based on the Friedman's analysis that such government fiscal policies in taxation led to the great depression (Beattie 2009). Indeed, in the case of South Korea, the primary aim of the legalization of the bitcoin virtual currency is to increase its tax collection to increase government revenue (Helmore 2017). In return, such government expenditure cannot ensure the bitcoin investors of their stability or increase in interest rate hence it is difficult for the businesses to grow. In the theory of quantity of money or monetarism, Friedman argues that money supply determines the price levels in the individual market (Beattie 2009). Based on this thought, increasing the money supply in a virtual currency could then be the most beneficial strategy for a country to eliminate inflation since it responds with the same rate as its revenue (Helmore 2017). In this regard, there is a possible opposition to a legalization of bitcoins by Friedman's propositions.
Reference List
Beattie, A. (2009). Free Market Maven: Milton Friedman. [online] Investopedia. Available at: https://www.investopedia.com/articles/economics/09/milton-friedman.asp [Accessed 14 Nov. 2017].
Helmore, E. (2017). Warnings grow louder over cryptocurrency as valuations soar. [online] the Guardian. Available at: https://www.theguardian.com/technology/2017/oct/08/cryptocurrencies-bitcoin-ethereum-bubble [Accessed 14 Nov. 2017].
