The Future of Cryptocurrencies in India

A cryptocurrency is an asset held digitally. It is designed as an exchange medium that relies on a strong code which helps keep the financial transactions secure and also controls the generation of additional units. Adding the blockchain allows for easier and safer verification of the transfer of assets.

The Cryptocurrencies have become a global phenomenon with several new currencies been launched and transacted every year. Famous examples of the cryptocurrencies include the ubiquitous Bitcoin, Ethereum, Dash, Ripple, Monero etc.?

Why are they in the news?

• The Indian Government is exploring the possibility of banning all private cryptocurrencies in India and institutes making a law which makes the holding and transactions of cryptocurrencies in India a criminal offense.?
• Instead, the government plans to launch a new single cryptocurrency which will be backed by the Reserve Bank of India.?

Why?

• The Government feels that the market of the bitcoins can not be easily regulated.
• Since cryptocurrencies are not backed by any object of monetary value, the government is doubtful if the current valuations of the cryptocurrencies will last in the long term.
• The lack of information pertaining to bitcoins makes their tracking difficult. This makes them an attractive avenue for funding terror activities which are a major security challenge.

What do the critics feel?

The opponents of the government’s plan feel that the government is overacting. They feel that the government can bring in a comprehensive regulatory environment for the cryptocurrencies but banning them would be counter-productive, given the scale of investments in the entire digital space.