- Cryptocurrency is the hottest word in the tech universe and among the investor class nowadays.
- India has long been reluctant to use cryptocurrency as a valid instrument of transaction.
- The new technologies cannot be left unregulated because they can be used for several illegal transactions.
In the last few years, there has been a lot of buzz around digital currencies, which includes cryptocurrency, virtual currency, and central bank digital currency. The volatility in the price of Bitcoin – the most popular digital currency of the world, has brought the discourse around digital currencies from the techno-financial world.
Cryptocurrency is the hottest word in the tech universe and among the investor class nowadays. In India, the craze for cryptocurrency is even higher, with a recent report revealing that the country has the world’s highest owners (10 crores) of this new form of currency. The enthusiasm among young Indians towards new technologies is very appealing, and this is the reason behind the exponential growth in the number of unicorns in the country.
However, the new technologies cannot be left unregulated because they can be used for terrorism, human trafficking, drug trafficking, and many other kinds of illegal transactions. Thus, these new technologies need to be under the supervision of regulatory authorities to ensure that their use is limited to advance the national interest and economic prosperity, not against it.
India has long been reluctant to use cryptocurrency as a valid instrument of transaction. RBI has released a notification in 2018 about banning private cryptocurrency in the country. But finally, the better sense prevailed, and the central bank kept its stance ambiguous.
In February this year, the Modi government introduced ‘The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021’ during the budget session of the parliament in order “to create a facilitative framework for the creation of the official digital currency to be issued by the Reserve Bank of India.”
Additionally, the bill also sought to “prohibit all private cryptocurrencies in India”, while, allowing certain exceptions “to promote the underlying technology of cryptocurrency and its uses.”
Given the central bank’s manipulation of the currency price simply by printing money, the libertarian block of the tech establishment wanted to get rid of the government-regulated currencies, and this led to the creation of Bitcoin, Mazacoin, Titcoin, and so on.
However, control over currency has been one of the major functions of the government, and thus the establishment is not ready to open it to the private players because it will lead to erosion of their power. Therefore, the emerging industrial powerhouses like China and India are not allowing privately held and traded digital currencies but coming up with a government floated and regulated digital currency.
The Communist government of China launched the first official digital currency of the world, which it sees as an alternative to the US dollar, amid the Coronavirus pandemic last year in June, and a few months after, trading of all private currencies like Bitcoin was blocked.
The Indian government should come up with a better regulatory mechanism for regulating cryptocurrency instead of banning it because the technology has the ability to solve the credit crunch (especially for MSMEs, which pay a poverty premium for credit) in India. “Inflows of cryptocurrencies from KYC-ed investors through approved Indian and global exchanges can potentially be allowed into India for the purposes of enhancing SME access to low-cost global capital,” wrote iSPIRT, the technology think-tank that has been behind revolutionary applications like UPI.
The Indian government is also supporting the underlying technology behind crypto, blockchain, for various purposes like CBSE results. A blockchain collects information together in groups, also known as blocks that hold sets of information. Blocks have certain storage capacities and, when filled, are chained onto the previously filled block, forming a chain of data known as the “blockchain.”
Thus, just like other use cases of blockchain are being promoted, crypto also needs to be promoted but with a better regulatory mechanism so that it cannot be used for illegal transactions. Also, the media, which played a major role in creating the crypto frenzy, needs to report with more responsibility and inform the people about the limitations and negatives associated with this new technology.