Decentralization and Centralization: The Two Facets of Digital Currency

How does the decentralization of Bitcoin differ from that of other cryptocurrencies? How does the decentralization level influence financial regulation in digital currencies? In what ways do CBDCs like the Digital Yuan vary in decentralization from Bitcoin? Why and how can the U.S. government sanction transactions with the so-called decentralized cryptocurrencies? In this chapter, we delve into the intricacies of decentralization of cryptocurrencies, specially focusing on Bitcoin among other digital currencies. We explore the principles of technology neutrality and functional equivalence in the context of digital currency regulation. We also examine the impact of varying degrees of decentralization on financial regulation and highlight the differences between Central Bank Digital Currencies (CBDCs) like the Digital Yuan (e-CNY) and Bitcoin. This chapter reveals a fact often neglected by non-professionals: while cryptocurrencies are decentralized, their transactions heavily rely on centralized exchanges, allowing governments to enforce legal measures on these virtual currencies.