Issue

Context

Recently, a government panel headed by senior bureaucrat Subhash Chandra Garg placed in the public domain a draft bill calling for a complete ban on private crypto currencies in India.

About

• The panel recommended a fine of up to ?25 crore and a jail term of up to 10 years for anyone found to be owning or handling private crypto currencies.
• As an alternative to private crypto currencies, the panel recommended the introduction of a single crypto currency for the whole country that is backed by the Reserve Bank of India.
• Volatility doesn’t sound like a good rationale to ban crypto currencies because if crypto currencies are volatile, so are many other asset classes.
• Also, banning the consumption of a good or service doesn’t really mean that people will stop consuming it.

What is Crypto Currency and general information?

• A crypto currency is a digital asset designed to work as a medium of exchange that uses strong cryptography to secure financial transactions, control the creation of additional units, and verify the transfer of assets.
• A crypto currency is a digital or virtual currency that uses cryptography for security.
• A crypto currency is difficult to counterfeit because of this security feature.
• Many crypto currencies are decentralized systems based on block chain technology, a distributed ledger enforced by a disparate network of computers.
• The first block chain-based crypto currency was Bit coin, which still remains the most popular and most valuable.

Advantages of Using Crypto currency

• Easy access and globally recognized: Crypto currency is readily accessible to all its intended users. It can be used by whoever it wants. It is a decentralized system of currency which can be used and accessed globally. In the case of Fiat currency the value of Euro, Dollar or yen may go up or down, but in the case of crypto currency, the market remains worldwide the same.
• Quick and easy payments: It is a quick transaction process. It takes hardly a few minutes to initiate a transaction. You have no obligation to disclose and share your personal details unless the details of your crypto wallet. Only the payer and the receiver will get to know about the payment and transaction and that is completely secured. The simplicity and advantage of anonymous dealings are one of the advantages that are making crypto currency popular.
• Facility of faster settlement: Unlike RTGS or NEFT payment method, you need not wait for getting your payment processing if you are doing your transaction using crypto currency. Being based on Block chain, crypto currency works in the peer-to-peer algorithm and the payment settlement gets completed flawlessly almost immediately.
• Private and secured: Cybercrime has become a global threat and doing online financial transaction has become extremely irksome die to the risk of identity theft, phishing, unwanted tracking of the regulatory body, non-transparency in the online payment system, etc.
• Facilitate e-commerce trade: It is a global currency and there is no restriction of using or paying by this global currency, which is easier and convenient for business and shopping portals. If the ultimate aim of an e-commerce portal is to business, crypto currency transaction can simply facilitate that. If e-commerce is the ultimate of global business, crypto currency can be the global currency for facilitating the business worldwide.
• Free from the risk of identity theft: Identity theft is one of the biggest risks of the online transaction but with block chain integration in crypto currency, the risk of identity theft is not prevalent at all. While doing payment by using crypto currency you can keep your personal information secret, and that is the reason, the risk of identity theft gets completely minimized here.

Disadvantages of Using Crypto currency

• It can be difficult to understand: Crypto currency is a new age currency and based on quite complicated block chain technology. It has lots of tweaks and twists in its learning curve. Without understanding the nitty-gritty of crypto currency, it is unsafe to deal with it.
• Uncertainty and volatility: The market for crypto currency is quite volatile hence it is unpredictable. It can be risky to invest in crypto currency without understanding its risk factors. Because of its volatile market, a group of people still feel uncertain about dealing with this digital currency.
• Still not accepted by all: Although crypto currency is a global concept and people have gained adequate knowledge about it, it is not accepted still by all. Some countries in the world have not legalized the use of crypto currency, and that is the reason, buying and selling via crypto currency is still some uncertain.
• No way to reverse the payment: Unlike check stop payment or request for cancellation of NEFT, it is next to impossible to stop the transaction of crypto currency once it is done. This irrevocable nature of payments may create a problem in business dealings, which cannot be countered.
• Losing wallet: If a user forgets his crypto wallet password, it is not possible to revive the lost data because of tight security encrypted block chain integration, which can be disastrous for its users.
• Problem of scaling: The crypto currency transaction speed can be limited due to the smart contract design. However, only by proven design, this problem of scaling can be solved, and it is expected also that in near-future crypto currency programmer will be able to sort out this scaling issue.
  These are all about the advantages and disadvantages of crypto currency. However, as this digital currency is being counted as one of the on uses of near future’s fiscal transactions, it is extremely important to know its pros and cons. As the knowledge about advantages will help you to utilize its best leverages, the knowledge of disadvantages will help you to stay away from the pitfalls.

Way forward

• To contain the flow of black money and demolish parallel economy.
• To cleanse the political or NGO, SHGs related funding.
• To tackle inflation and for better transmission of policy rates.
• To reduce the cost of the transaction.
• To improve tax collection by maintaining proper records.

Learning Aid

Practice Question:

Do you think recent recommendation by Subash Garg committee for a complete ban on private crypto currencies in India is feasible? Elaborate.