The growing importance of cryptocurrency worldwide
The growing importance of cryptocurrency worldwide!
This editorial is based on the article “Catching the New Tech Wave” published in The Indian Express on 31/05/2021. This editorial discusses the growing importance of cryptocurrency worldwide. Along with this, it has also been discussed that why India needs to accept this to walk shoulder to shoulder with the world in the upcoming phase of digital revolution?
Reference — The growing importance of cryptocurrency worldwide!
With the creation of bitcoin in the year 2008, to date cryptocurrency has carved a niche around the world. The gains in the sector since the start of the COVID-19 pandemic in January 2020 are astonishing. It is known that the “cryptomarket” increased by more than 500%.
- However, in the 2018–19 budget speech, the Finance Minister stated that cryptocurrency is not recognized by the government.
- Considering the fact that India has been a late adopter of all phases of the digital revolution, whether it is semiconductors or internet or smartphones.
- So now there is a need to change the views on these virtual currencies and give them approval as it will be India’s first step towards entering the new phase of digital revolution of India.
The rise of cryptocurrency: The first cryptocurrency, Bitcoin, traded only $ 0.0008 in 2010 and had a market value of about $ 65,000 in April 2021.
- Since the launch of bitcoin many new cryptocurrencies Also came on the market and by May 2021, their total market value has increased to $ 2.5 trillion.
Importance of cryptocurrency:
- Prevention of Corruption: Since cryptocurrency blockchain systems operate on a peer-to-peer network, it helps prevent corruption by tracking the flow of money and transactions.
- Time effective Cryptocurrencies can help in saving substantial time for the sender and receiver of money as it operates completely over the internet. It operates on a mechanism that involves very low transaction fees and is almost instantaneous.
- cost effective: Intermediaries such as banks, credit cards and payment gateways charge around $ 3 trillion in fees from the entire global economy of $ 100 trillion for their services.
- Integrating blockchain into these areas can save hundreds of billions of dollars.
- Cryptocurrency in India: In the year 2018, RBI issued a circular prohibiting all banks from working in the field of cryptocurrencies. this Supreme Court in circular in May 2020 unconstitutional was declared.
- Recently the government decided to create a sovereign digital currency as well as ban all private cryptocurrencies. “Cryptocurrency and Official Digital Currency Regulation Bill, 2021” announced the presentation.
- Funds going to Indian blockchain start-ups in India account for less than 0.2% of the amount raised by the sector globally.
- Due to the current attitude towards cryptocurrencies, it is almost impossible for blockchain entrepreneurs and investors to make huge economic gains.
Issues related to banning decentralized cryptocurrencies
- Complete Restrictions: The “Cryptocurrencies and Official Digital Currency Regulation Bill, 2021” seeks to ban all private cryptocurrencies in India.
- However, it is wrong to classify cryptocurrencies as public (government-backed) or private (one-person-owned) because cryptocurrencies are decentralized but not private.
- Decentralized cryptocurrencies like bitcoin cannot be controlled by any private or public entity.
- Brain-drain: The ban on cryptocurrencies could result in an exodus of both talent and business from India, as was the case after the RBI’s 2018 ban.
- At the time blockchain experts were from Switzerland, Singapore, Estonia and the U.S. As countries moved to where crypto was regulated.
- The outright ban would hinder the use of blockchain in the areas of innovation, governance, data economy and energy.
- Lack of Transformational Technology: This ban will deprive India’s entrepreneurs and citizens of a transformative technology that is being rapidly adopted around the world, including some of the largest enterprises such as Tesla and MasterCard.
- A complete ban on private cryptocurrencies would only create a parallel economy, encouraging illegal usage that would defeat the original purpose of the ban. The ban is not possible as anyone can buy cryptocurrency on the internet.
Conflicting policies: Banning cryptocurrencies is inconsistent with the Ministry of Electronics and IT’s (MeitY) draft National Strategy on Blockchain, 2021, which acknowledged blockchain technology as a transparent, secure and efficient technology.
- Regulation itself solution: Regulation is needed to prevent serious problems and to ensure that cryptocurrency is not misused and to protect investors from excessive market volatility and potential scams.
- Regulation needs to be clear, transparent, consistent and guided in terms of what its purpose is.
- Clarity on Cryptocurrency Definition: The legal and regulatory framework should first clarify the definition relating to cryptocurrencies. Under national laws these would fall under currency securities or be defined as other financial instruments.
- Strong KYC Norms: Instead of a complete ban on cryptocurrencies, the government will regulate the trading of cryptocurrencies by including stringent KYC (Know Your Customer) norms, reporting and taxability.
- Ensuring Transparency: Record keeping, inspections, independent audits, investor grievance redressal and dispute resolution may also be considered to address concerns about transparency, information availability and consumer protection.
- Fostering Entrepreneurial Spirit: Cryptocurrency and blockchain technology can fuel the entrepreneurial wave in India’s startup ecosystem and create employment opportunities at various levels, from blockchain developers to designers, project managers, business analysts, promoters and marketers.
India is currently on the cusp of the next phase of the digital revolution and can emerge as a leader by channeling its human capital, expertise and resources into this revolution. For this only policy formulation needs to be corrected.
Blockchain and crypto assets will be an integral part of the fourth industrial revolution. Indians should not bypass it.
“It is time for India to move from its dominant payment systems to the most active payment system of the upcoming digital revolution. Cryptocurrencies play an important role in fulfilling this notion.” Definitely, we have to discuss the positive and negative aspects associated with it.
By Team Vlog Bharat