A cryptocurrency is a digital asset designed to serve as an exchange medium wherein specific crypto ownership records are kept as a computerized database in a ledger using potent cryptography to secure transaction data, regulate the production of additional coins, and check the transfer of ownership of coins.
The most traded cryptocurrency, Bitcoin, reached a market capitalization of $1 trillion for the first time on Friday. The surge was driven by interest from substantial companies such as Tesla Inc, PayPal, and Mastercard.
Then why has the Parliament of India proposed to introduce a bill prohibiting cryptocurrencies?
The transactions in Bitcoin occur in a shared ledger called a blockchain. And the bitcoin blockchain is a permanent public record of all transactions that anyone can access at any time. If anything, blockchain transactions are coded with public-key encryption that hides people’s real identity behind the transactions making it susceptible to be used for terrorist financing and other unlawful practices.
The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, is one of the bills to be introduced in the Parliament in this budget session.
The bill includes a ban on all virtual currencies in India and provides for the Reserve Bank of India to launch an official digital currency. The move was made after an inter-ministerial council, including members of the Reserve Bank of India (RBI), felt that private cryptocurrency would present a threat to the country’s financial security. The government has also stated, “The bill seeks to prohibit all private cryptocurrencies in India. However, it would allow certain exceptions to promote the underlying technology of cryptocurrency and its uses,” in its remarks on the bill.
In 2018 also, RBI agreed to ban the use of banking platforms to procure or sell cryptocurrencies after they gained fine popularity in 2017 in the country, concerning the fact that they are intangible and unregulated and could be used for unlawful operations. After the Supreme Court removed the RBI ban in March 2020, Indian investors resurrected their trust in cryptocurrencies, offering cryptocurrencies another shot in India. But the proposal of the ban has left the Indian crypto community uneasy and nervous yet again.