The Indian Government is planning to ban the trade in crypto currency. The bill has not yet been discussed but it is expected to be discussed soon by the Federal Cabinet before it goes to the Parliament. Though exchanges are legal in India but the crypto currency is not a legal tender. Crypto currency uses the technology of blockchain. It stores the information in blocks and the different blocks together form a chain which altogether saves the data.
The government is inclined towards supporting the technology which is used behind the working of crypto currency. The main reason due to which many countries have banned the currency is that it does not keep a proper track of records which could help to identify the people involved in the transaction. This has resulted in fraudulent transaction using the currency. The identification of the people involved in the transactions is by the digital signature. It means the identification is limited to the walls of the working of the technology, i.e. blockchain.
The risk of hacking, exist in this technology but it is very difficult for a hacker to crack it. The blockchain works in linear and chronological pattern so if a hacker tries to hack any block, he/she has to do the same with all the blocks till the end which is not completely possible. 51% of the blocks need to be hacked for the unethical practices. This kind of practice is not possible when the transactions are in millions.
The government is not in support of using crypto currency due to several reasons.Illegal activities, exchange rate volatility, and vulnerabilities of the infrastructure underlying them. It could create a parallel economy in a country which would lead the government to a secondary level and it can also lose control which would definitely loosen the stability of the financial condition in the country. The Indian central bank had in 2018 banned crypto transactions after a string of frauds in the months following PM Narendra Modi’s sudden decision to ban 80% of the nation’s currency.
From January to May, 2020 the transactions can be seen rising from $2.2 million to $22.1 million. A Mumbai based crypto exchanger, WazirX grew 400% in March and 270% in April, on month-on-month basis. A ban could affect 1.7 million Indians trading in digital assets. It would also affect companies which have been operating in India. Singapore based company, CoinSwtich have added 200,000 users and the volume of transactions amounts to $200-$300 million. State owned authorities are reluctant to work with the companies due to lack of clarity and what if some fraud happens and the government authorities cannot take risk in the working of the financial system. Instead of a ban, Government should regulate the working of crypto currency to ensure adequate working as per the saying of a partner of Khaitan & co, a NewDelhi based Law firm.
The government is encouraging the use of blockchain technology as it could work great in maintaining financial records, records in healthcare sectors and property related records. It is difficult to change the information and the access can also be restricted to the efficient used. The complete ban for crypto currency might not be executable. Firstly, it is very difficult to regulate and ensure that the ban being implemented as it is difficult to track. Secondly, If India completely bans the cryptocurrency, it could lose millions of revenue and job creations. Instead of a ban, the government could regulate the working by adopting the positive points of the technology and finding the loopholes and try to resolve it as this technology and the currency may become a part of our future working and could bring many investors as well.
By: Sweeni Saluja
Sources:
Economictimes
Bitcoin
Investopedia
Image sources:
Indiatimes
Indiatv