Germany wants to take cryptocurrency under government control. On January 2, the Christian Social Union (CSU) presented a document which offers several solutions to combat terrorism. According to Die Welt, one such solution includes taking transactions of virtual currencies such as Bitcoin under control. Such a measure is aimed at preventing terrorism financing,  a problem that stands sharp especially after the Munich terror alert.

Bitcoin allows anonymous transactions without the necessity of personal identification or the ability to track sender and receiver. No wonder the currency is so convenient for illegal purposes such as financing terrorist acts. According to Die Welt, “the so-called Islamic State is financed mainly by oil sales, the antique-trade and, probably, by donations from around the world”.

That is the main reason the German government wants to control cryptocurrency transactions in the first place - they want to dry out terrorists’ income sources as even they need money to act. Seems reasonable enough, though it contradicts the principle of anonymity of Bitcoin. On the other hand it may be a fair price for the possibility of weakening terrorism.

Can the german government create a cryptocurrency with restrictions?

Vitalik Buterin, the founder of Ethereum, thinks it is quite possible for the government to provide restrictions for cryptocurrency, but they would have to create a new kind of it for such a purpose. He told Cointelegraph:

“You can definitely create a cryptocurrency that has various kinds of restrictions on it that governments might want; a system where you need to have a certificate cryptographically signed by the government in order to create an account is one example”.

However, users of existing cryptocurrencies need not be afraid the government would make them less anonymous. They can create new currency for their purpose but they can’t thrust their changes upon existing ones. Buterin added:

“Governments can't really force those kinds of changes onto existing cryptocurrencies, unless they convince the entire miner and developer community of that cryptocurrency to accept the changes”.

Vitalik Buterin, the founder of Ethereum