Table of Contents
- 1 WHAT IS CRYPTOCURRENCY?
- 2 EXAMPLES OF CRYPTOCURRENCY
- 3 ADVANTAGES OF CRYPTOCURRENCY AND WHY THE GOVERNMENT SHOULD NOT BAN IT ?
- 4 1.Decentralization
- 5 2.Easy Transactions
- 6 3.More Confidential
- 7 4.Self-Governed
- 8 SUBHASH CHANDRA GARG COMMITTEE
- 9 ADVANTAGES OF THE (CBDC) CENTRAL BANK DIGITAL CURRENCY
- 10 RECENT DEVELOPMENTS ON CRYPTOCURRENCY
- 11 CONCERNS IN CBDC (Central Bank Digital Currency)
- 12 DIFFERENCE BETWEEN CRYPTOCURRENCY AND THE CENTRAL BANK DIGITAL CURRENCY (CBDC)
- 13 OBJECTIVES OF CBDC
- 14 CONCLUSION
WHAT IS CRYPTOCURRENCY?
CryptoCurrency is a payment that survives only in electronic form using a technology called a blockchain, a decentralized technology stretch across many computers that manage records and transactions. It can be transferred with the help of technology like computers, smartphones, and the internet between users and entities.
EXAMPLES OF CRYPTOCURRENCY
ADVANTAGES OF CRYPTOCURRENCY AND WHY THE GOVERNMENT SHOULD NOT BAN IT ?
Unlike fiat currencies which are controlled by the government, there is no one to monitor what are you doing. It involves only two parties in the consensuses.
There is no need to pay transaction fees when you are dealing with any business, unlike those transactions where you must pay for transactions fees and it furthermore removes the need for the middleman.
It safeguards users from matters like identity theft because of the technology that supports them – blockchain.
It’s transactions are set aside by developers/miners on their hardware, and they get the transaction fee as a reward for doing so. The miners are getting paid for it, they keep transaction documentation detailed keeping the integrity of the cryptocurrency and the records decentralized.
DISADVANTAGES AND WHY GOVERNMENT WANTS TO BAN IT?
1.Risk in Security
Cryptocurrency can be used for terror funding, buying drugs on the dark web.
Prices of Bitcoin are extremely volatile, rising and falling at a rapid rate.
Expects a lot of electricity and computational power for Mining Cryptocurrency. A crucial contribution to the carbon footprint.
Bitcoin transactions cannot be altered, it can only be refunded by the person collecting the funds.
In 2017, the government had established an Inter-Ministerial committee to study the matters associated with virtual currency.
SUBHASH CHANDRA GARG COMMITTEE
The committee in 2019 has recommended banning private version of it in India and proposes a 10-year jail term for a violation due to risks associated with and volatility in prices and proposed the bill ‘Banning of Cryptocurrency and Regulation of Official Digital Currency Bill, 2019. The Committee has proposed the RBI (Reserve Bank of India) backed National Digital Currency or Central Bank Digital Currency (CBDC).
ADVANTAGES OF THE (CBDC) CENTRAL BANK DIGITAL CURRENCY
It will allow central banks to know who holds what and is backed by the Reserve Bank of India. A centralized mutable ledger that contains peer-to-peer properties.
2.Prevent illegal activities
Drastically prevents money-laundering havoc, significant obstacles to illegal actions as it is easy to identify and trace back to previous sources.
Central bank digital currency is a liability of the nation’s central bank in the digital form thereby trusted by the people of that nation.
RECENT DEVELOPMENTS ON CRYPTOCURRENCY
According to Cambridge University’s Bitcoin Electricity Consumption Index CryptoCurrency is expected to use 0.6 percent of the world’s total electricity production in 2021.
Currently, El Salvador, a small coastal country in Central America has become the first in the world to allow bitcoin as a legal tender.
In recent months, China has cracked down on crypto mining operations.
China becomes the first major economy to issue digital currency (DCEP) Digital Currency Electronic Payment).
Countries like Turkey bans cryptocurrency, India continues to threaten a ban, crypto could mean jail in Nepal.
CONCERNS IN CBDC (Central Bank Digital Currency)
1.Amendment in Coinage act
2.Foreign exchange management act
3.Information, and technology act
4.Reserve bank of India act
DIFFERENCE BETWEEN CRYPTOCURRENCY AND THE CENTRAL BANK DIGITAL CURRENCY (CBDC)
1.Unlike the Central Bank Digital Currency cryptocurrency cannot be converted into cash.
2.Cryptocurrency offers anonymity while CBDC would allow exactly who holds what.
3.Central Bank Digital Currency is Centralized and backed by the government of the nation while Cryptocurrency is decentralized.
4.CBDC appears on the Balance Sheet of the nation’s central bank and is a legal tender, on the other hand, crypto is not a legal tender not even backed or appears in the balance sheet of any nation’s central bank.
OBJECTIVES OF CBDC
1.CBDC will fulfill future payment needs in a digital economy.
2.It will support the resilient payment landscape.
3.CBDC will support competition efficiency and innovation in payments.
4.Avoiding the risk of new forms of private money creation.
5.Work as a building block for better cross-border payments.
Need of the hour is to introduce CBDC because this is a period of significant change in money and payments. At present, the Central Bank of various nations is examining the positive implications that a digital currency contributes to financial inclusion, economic growth, technology, innovation, and increased transactions efficiencies.