Cryptocurrency is an online-based currency that uses cryptographical functions to conduct financial transactions. Therefore, it is free from any government control and interference. It is exchanged among two parties and uses private and public keys. It helps consumers to escape high fees paid by the traditional financial institution. The RBI issued a circular abstaining from trading its entities and banks in any Cryptocurrency transaction. This ended businesses of cryptocurrency trade.
The reason behind the Ban of Cryptocurrency by RBI
Cryptocurrency is a mode of currency without any legal sanctity. It does not involve any authorised public institution to protect customer interests. The use of online technology has contributed to the proliferation of virtual currencies. In the Financial Stability Report of June 2013, these developments pose challenges in the form of regulatory, legal and operational risks. It defined virtual currency as a form of an unregulated digital currency issued and controlled by its developers. Furthermore, it is used and accepted by the members of a specific virtual community.
Cryptocurrency, such as bitcoin, has become a major financial breakthrough. Bitcoin has attracted various criminal groups and poses a possibility of funding terrorist acts where it allows the anonymous transfer of funds. These transfers are hard to detect.
The Current Situation
On March 2020, the SC lifted the ban of Cryptocurrency. It argued that the ban was unconstitutional as it regarded it as a product or a good rather than money or a legal tender. The Court noted that the circular disabled the banking sector from cryptocurrency exchanges. Although the judgment provided temporary relief, there is an absence of proper regulation on the cryptocurrency market. As a result, the Government drafted a bill, but there is no approval.
Covid-19 and Cryptocurrency
The COVID 19 outbreak has affected many people around the world and has taken along the share market. The economies around the globe are suffering and the stock markets are collapsing. The prices of oil are also dropping. Moreover, pandemic misfortunes have also seriously affected Cryptocurrencies.
Unlike legal tender or assets, there are a fixed number of bitcoins to preserve their value. The system of blockchain is designed wherein there will always be a fixed number of coins in mining. There is a low chance that COVID-19 will have any impact on the value. Halving is necessary to extract the number of bitcoins in circulation. This process reduces the rate by half and the value does not fluctuate immediately before or after halving. However, given the economic crises and fluctuations, it is very predictable.
In India, the crypto traders were not exposed to this market because of the RBI ban. Indian traders would be able to invest and trade in Cryptocurrency as it creates jobs. It emphasises upon decentralising the control of the authority in finance. Per contra, the future of Cryptocurrency in India is uncertain. There is an ongoing process of passing a law about the ban of Cryptocurrency.
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