In order to understand the merits and demerits of the CryptoCurrency Bill, also called Crypto Bill, one has to delve into the sphere and understand what cryptocurrency is. This is required for a clearer understanding of the bill. Not only this, but the knowledge of cryptocurrency will also aid one in forming their own opinions of the same.
What is cryptocurrency? – It is a digital form of money and is decentralized. This means that unlike the US Dollar or the Euro, there is no centralized body to regulate and manage its value. It can also be termed as a deregulated form of money. Cryptocurrency is monitored by peer-to-peer internet protocol and is an encrypted string of data encoded to signify one unit of currency.
In a nutshell, cryptocurrency is just like paper money and can be used to carry out day-to-day transactions and buy regular goods and services although many people invest in cryptocurrencies as they would in other assets, such as stocks or precious metals such as gold.
Why is cryptocurrency gaining traction? - Albeit the fame of cryptocurrency in other countries is commendable with instances like Elon Musk investing a handsome amount of money on Bitcoin( a form of cryptocurrency), people in India too are showing interest. Understanding this phenomenon is important to understand the aftermath of the bill (if implemented).
- Failing government policies - It is no secret that many government policies have failed miserably having an impact on the economy of the country. Plus, in the last two years, the business has slowed down due to the ongoing pandemic and no one knows what’s in store for the future. Also, nothing appreciable has been done by the government for the revival of the economy. With all these phenomena going on, crypto has been a savior and hence the inclination of people towards it. This has been possible because of the decentralized and the deregulated nature of the currency.
- Progressive Taxation – Taxes are no doubt a necessity. An individual who earns more has to pay a higher tax and a person who earns less, has to contribute less. But in the case of crypto, no such system exists. It is a good escape from the taxation system and nevertheless the less digital knowledge of the currency and its working, it is gaining fame.
- Type of digital gold – People invest in a lot of things. Precious artifacts, stocks, and precious, high-value metals. One metal that all people invest in is Gold. Prices of gold usually increase providing people with a good deal of benefits and it seldom disappoints. Somewhat similar is the case with cryptocurrency. The meteoric rise that people witness in it is a key factor of people getting more interested.
But is crypto full of advantages and no negatives? That is not the case. Understanding its disadvantages is equally important to weigh the consequences of the bill better.
Perils of cryptocurrency -
- Deregulated - Deregulated nature of the crypto can be advantageous not just to genuine users but also to hackers and spoofing. Digital theft is a possibility since no one is present to oversee the activities.
- Stability- The graph does not always go high. There have been times when downfall has been witnessed. The volatility of crypto is another aspect that needs to be kept in mind.
- Scalability- While security and decentralization are what the main focus of crypto is, speed remains an issue.
THE CRYPTOCURRENCY BILL - In the year 2018, a circular by the RBI was issued barring banks and other financial institutions from facilitating transactions using crypto. SC however quashed the circular on grounds of ‘disproportionality’ and business using crypto resumed. In the Budget Session held from January 29, 2021-April 18,2021, the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 was to be introduced. This proposed creation of a facilitative framework for the creation of ‘official digital currency’ and prohibit all private crypto in India. This however was presented neither in the Budget nor the Monsoon session. The reason given was more introspection on the matter.
What if the bill is implemented in India? Will it be useful for the masses as a whole or will the rich become richer? Is it a good deal to exit the crypto bus?
The fact that corruption will be controlled because of the digital signature mechanism of the currency cannot be neglected. FDIs will be attracted. Technological development will be promoted for sure. India will be able to compete with the developed nations across the globe.
A host of advantages exist but the next question arises –Given the digital literacy divide and money in hands of a few, is India ready?
I leave the choice to you.
