Why in news?
The Banning of Cryptocurrency and Regulation of Official Digital Currency Bill, 2019 has been leaked recently.
Why is there support for the ban?
- There are high chances of cryptocurrencies being misused in money laundering.
- Various government bodies such as IT, CBDT, and the customs departments are supporting its ban.
- The bill has proposed stringent penalties, including 10 years of imprisonment for holding, selling or dealing in cryptocurrencies.
What is a blockchain?
- It is an accounting ledger which can store data on any real-world transaction of any kind.
- The unique feature of this ledger is the decentralised style.
- Every computer connected to a blockchain network helps validate and record transactions.
- People who connect their computers to a network are known as validators and receive transaction fees in the form of tokens.
- It also has data encryption, which makes it highly resistant to tampering.
- It can perform on public basis (such as Bitcoin) or private, with a single entity operating a closed blockchain system.
What is the potential of blockchain?
- Blockchain technology has the potential to create new industries and transform existing ones.
- Some new companies are investing millions in research and development.
- Venture capitalists invested $2.4 billion in blockchain and cryptocurrency start-ups in 2018.
- Even big technology companies have started to take blockchain seriously. E.g Facebook’scryptocurrency Libra.
Why shouldn’t there be a ban?
- A law to ban cryptocurrency would prevent Indians from reaping economic benefits by participating in blockchain networks as validators and earning transaction fees.
- The ban also will stifle any innovation related to this disruptive emerging technology.
What India can learn from Europe?
- The European Parliament and European Council are working on an anti-money laundering directive known as AMLD5.
- All crypto exchanges and wallet custodians operating in Europe will have to implement strict know-your-customer (KYC) onboarding procedures and need to register with local authorities.
- They will be required to report suspicious activities to relevant bodies.
- The EU Commission is also proposing
- self-declaration by virtual currency owners,
- the maintenance of central databases registering users’ identities and wallet addresses, and
- norms while using virtual currencies as payment or investment means by 2022.
- This is a more reasonable approach, and the Indian government could follow suit.
Source: The Hindu
