Integrated Ombudsman Scheme
16th November, 2021 Polity
Figure 2: No Copyright Infringement Intended
- Recently, the Prime Minister of Indiachaired a meeting regarding the management of the cryptocurrency sector. Citing the unregulated nature of the crypto market, he called for taking progressive and forward-looking steps.
About the Cryptocurrency:
- A cryptocurrency is a form of digital asset based on a network that is distributed across a large number of computers.
- Cryptocurrencies typically use decentralized control as opposed to centralized digital currency and central banking systems.
- Blockchains, which are organizational methods for ensuring the integrity of transactional data, are an essential component of many cryptocurrencies.
Benefits of Cryptocurrency:
- Autonomy: Digital currencies allow users more autonomy over their own money than fiat currencies do, at least in theory. Users are able to control how they spend their money without dealing with an intermediary authority like a bank or government.
- Discretion: Bitcoin purchases are discreet. Unless a user voluntarily publishes his Bitcoin transactions, his purchases are never associated with his personal identity, much like cash-only purchases, and cannot easily be traced back to him.
- Peer-to-Peer Focus :The bitcoin payment system is purely peer-to-peer, meaning that users are able to send and receive payments to or from anyone on the network around the world without requiring approval from any external source or authority.
- Elimination of Banking fees: bitcoin users are not subject to the litany of traditional banking fees associated with fiat This means no account maintenance or minimum balance fees, no overdraft charges and no returned deposit fees, among many others.
- Accessibility: bitcoin is theoretically available to populations of users without access to traditional banking systems, credit cards and other methods of payment.
Challenges with Cryptocurrency:
- Can be used for illegal transactions – Since the privacy and security of cryptocurrency transactions are high, it’s hard for the government to track down any user by their wallet address or keep tabs on their data.
- Decentralized but still operated by some organization –The cryptocurrencies are known for its feature of being decentralized. But, the flow and amount of some currencies in the market are still controlled by their creators and some organizations. These holders can manipulate the coin for large swings in its price.
- Adverse Effects of mining on the environment – Mining cryptocurrencies require a lot of computational power and electricity input, making it highly energy-intensive.
- Security Risk: Bitcoin exchanges are digital and thereforevulnerable to hackers, operational glitches, and malware.
- Decentralised Control: Given the essentially decentralized control approach associated with cryptocurrencies like the Bitcoin as against the traditional centralized digital currency and centralized banking systems, they render government monetary policies ineffective.
Indian stand on cryptocurrency:
- The Ministry of Corporate Affairs (MCA) has made it mandatory for companies to disclose crypto trading/investments during the financial year.
- The Centre has assured crypto stakeholders that there won't be a blanket ban on digital currencies and that it's still formulating its full opinion on the matter. Finance minister Nirmala Sitharaman has said the Centre was open to experimentation with new technologies and is not closing its minds for them.
- India does not have a regulatory framework to govern cryptocurrencies as of now. The government had constituted an Inter-Ministerial Committee (IMC) on November 2, 2017, to study virtual currencies.
- Learning from international experience: The U.K. has classified cryptocurrency as property and this has paved the way for cryptocurrencies to be encompassed within a regulated legal framework in the country’s economy. The U.K. has sought to regulate the functioning of crypto-businesses while still imposing some restrictions to protect the interests of investors.
- There is a need for a balanced regulation of the cryptocurrency which could allow private individuals the freedom to harness a powerful new technology like blockchain technology-based digital currency with appropriate regulatory standards.
- The government should use this as an opportunity to allow private individuals the freedom to harness a powerful new technology with appropriate regulatory standards.