Much of cryptocurrency's value comes from the lack of regulation. People are not satisfied with the existing solutions, thus the need for innovation. BTC emerged after the US destroyed LibertyReserve and eGold.

Government could eliminate the some of the needs for cryptocurrencies by removing regulatory barriers to transact.

As an example, compliance costs prohibit PayPal from efficiently processing 25 cent arcade or in game transactions.

>Instead of the standard 2.90% + 30p per transaction that PayPal charges, you’ll be charged a 5% + £0.05 fee on every transaction. This would mean that on a £1 transaction, you will pay 10p as transaction fees, rather than 59p, and you save 41p. Ordinarily, this does not look much, but if you sell very high volumes at low prices, it quickly adds up to become a significant saving. After all, it’s a small leak that sinks great ships.

Additionally, for electronic goods most processors require the merchant to offer a no questions asked refund policy.