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DAILY NEWS ANALYSIS

GS-III :
  • 14 August, 2019

  • Min Read

Ban or regulate? On India’s policy on cryptocurrencies

Ban or regulate? On India’s policy on cryptocurrencies

Context

The recommendation of an inter-ministerial committee that India should ban all private cryptocurrencies, that is, Bitcoin and others like it hardly comes as a surprise.

Background

  • Indian policymakers and administrators have time and again made clear their distaste for them, their existence owed almost entirely to advanced encryption technologies
  • In his Budget speech in 2018, Finance Minister Arun Jaitley said the government doesn’t consider them legal tender.
  • The Reserve Bank of India has repeatedly warned the public of the risks associated with dealing with cryptocurrencies.
  • Bitcoin, the most prominent among them, has fluctuate value, even over short periods of time.

No central authority to regulate

  • Governments and economic regulators across the world are wary of private cryptocurrencies.
  • As they need neither a central issuing authority nor a central validating agency for transactions, these currencies can exist and thrive outside the realm of authority and regulation.
  • They have even deemed a threat to the official currency and monetary system. The question then is whether banning cryptocurrencies is the most effective way to respond.

Some important cryptocurrencies

  • Bitcoins
  • Litecoin
  • Namecoin
  • Swiftcoin
  • Bytecoin
  • Gridcoin

The risk associated with the use of cryptocurrency

Digital currencies, being in electronic format, are prone to losses arising out of hacking, loss of password etc. Lack of any authorized central agency to regulate the payments or to turn to for redressal of grievances. There is no underlying of an asset for Cryptocurrencies, making the value a matter of speculation. The exchanges are located in various parts of the world, making law enforcement a tricky thing for the multiple jurisdictions available. Trading may subject the user to illicit and illegal activities since the cryptocurrencies, can easily be used for illegal activities anonymously.

Conclusion

  • Even there, the report says, “owing to the network-based nature of cryptocurrencies, after banning domestic crypto exchanges, many traders turned to overseas platforms to continue participating in crypto transactions.”
  • Trading in China is now low but not non-existent.
  • But why would an outright ban be a superior choice to regulation, especially in a field driven by fast-paced technological innovations?
  • The report, unfortunately, doesn’t clarify that point.

Source: The Hindu


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