Gist of Editorials: Is Banning Cryptocurrencies the Solution? | GS – III


Relevance :  GS Paper  III


Recently, the Grag panel has  called for a complete ban on private cryptocurrencies in India.

Recommendations of the  Garg panel

  • Fine of up to ₹25 crore and a jail term of up to 10 years for owning or handling private cryptocurrencies.
  • Introduction of a single cryptocurrency for the whole country backed by RBI

Reasons to ban cryptocurrency

  • volatility of private cryptocurrencies
  • not backed by a sovereign government
  • due to anonymity, they can be used to finance criminal activities.

Should crypto currency be banned?

  • if cryptocurrencies are volatile, so are many other asset classes
  • Banning will lead to formaition of underground market.
  • It is not essential that a currency needs to be backed by an institution
  • monetary policy doesn’t face any threat from cryptocurrencies

Cryptocurrency vs blockchain

The cryptocurrency is just one application of the underlying blockchain technology.

The EU regulations on cryptocurrency

  • The EU is putting in regulations called AMLD-5 to tackle money laundering.
  • It is a bunch of norms to make crypto transactions more secure.

Should govts issue cryptocurrency?

  • It would create a lot of problems in the form of contradictions in existing regulations.
  • A digital currency issued by the RBI that gets misused by criminals can affect trust in the existing fiat currency protocol.

Way forward

  • Whether to invest in an asset or not should be left to the investor.
  • Govt can come up with a regulatory framework.
  • For exploration of the blockchain technology, cryptocurrencies should be allowed to operate.

Conclusion

Regulations on cryptocurrencies could be the best way to go forward rather than putting a blanket ban.


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