Can India allow Crypto currency – Bitcoin sacrificing Rupee?

If we are to understand Crypto currency, it is crucial to first appreciate the role of Block Chain Technology (BCT). If Crypto currency is an automobile, BCT is the engine. Thus, Crypto currency cannot exist without BCT, while BCT can exist independently as a technology due to it’s various applications in e-commerce, fund transfers, voting, health care, marketing and all activities where accountability, transparency, accuracy in tracking, transaction costs matter in productivity of service through quality control.

Block Chain Technology

Commencing from a person who requests a transaction is stored in a block and the transaction is broadcast to a peer to peer network aided by computers or nodes, which validate the transaction and user’s status using known algorithms. In the block, the verified transaction for instance can be contracts, records, crypto currency, and other documents. Upon verification, the transaction is combined with other transactions creating a new block of data, called a ledger. This new block is added to the existing block chain completing the transaction. Block chain is a digitized, distributed and secure ledger that guarantees immutable transactions and solves the trust problem when two parties exchange value. For instance, Sahyadri Farms, a Farmer Producer Company in Nasik, Maharashtra is using BCT in exporting quality grapes and has emerged as India’s largest grape exporter, exporting 17% of grapes. In agriculture, one of the benefits of BCT is accurate traceability of produce such as the farm from where a produce was cultivated, the soil properties, quality of inputs used, nature of agrochemicals used from production to marketing. Especially consumers who pay substantially higher for organic produce can track the farm, farmer and quality through BCT.

Crypto currency

Crypto currency is a digital or virtual currency. Bitcoin for instance is one of the several crypto currencies and is not a coin in the conventional sense. Bitcoin is the world’s biggest crypto currency with a price of $51541 per coin, followed by Ethereum ($2205), Bitcoin cash ($927), Litecoin ($267) and so on. The value of Bitcoin fell by 14% on 20 th April 2021. Therefore it is crucial to note the extent of fall which can be so steep. Can the market forces responsible be traced ? Can there be a possible consideration of devaluation as a monetary policy to promote exports ? Let us not forget how India benefited from 1991 economic liberalization. But these are obsolete with crypto currencies.

If crypto currency is so transparent, why Bitcoin founder/s have not been?

Satoshi Nakamoto is the pseudonymous person or a group of persons who developed Bitcoin, devising the first block chain data base, solving the double-spending issues using peer to peer network. It appears, several persons claiming to be Nakamoto. The question which arises here is, if crypto currency is so transparent and accountable, why the developers of Bitcoin have maintained secrecy and therefore gives raise to apprehensions regarding the future of crypto currencies irrespective of their potential benefits.

Crypto currencies secure from counterfeit

Crypto currencies are secured from counterfeiting, avoiding double accounting and do not require monitoring and control by any central bank. While there are advantages of this benefit, there can be potential disadvantages since the trust of citizens lies with the Central Bank – the Reserve Bank of India. The benefit of avoidance of counterfeit notes is enormous for India where neighboring countries are often found to have reported in counterfeit involvement as also disturbing peace and tranquility in border areas. Similarly the benefit of double accounting, i.e. a currency once transacted for a purpose is recorded and cannot be transacted again since each transaction is recorded in the public ledger in the block chain. Since each digital or virtual currency is numbered and unique it is possible to locate each transaction made by person/s, institution/s and there can be no double transaction. This avoids corruption / rent-seeking behavior.

Can any country sacrifice it’s currency, a national identity to accommodate crypto currency? Even with all the benefits appreciable, the crucial question is can any country sacrifice it’s own currency and accommodate a crypto currency like for example Bitcoin?. Indian Rupee for India, US $ for the US, Japanese Yen for the Japan, for instance serve as the nation’s identity. Can any country sacrifice it’s nation’s identity?

Supreme Court ruling on Crypto currency

Can any country permit more than one currency in transactions? It is crucial to ponder regarding permission of operation of two or more currencies in any country and the confusion it can create among the general public. In the absence of monitoring by a central Bank, crypto currencies can be conduit for black money or money for funding illegal activities such as terrorism. The RBI in a circular issued in April 2018, banned financial institutions providing services in exchange /trading of crypto currencies. This was challenged in the Supreme Court which ruled that crypto currency is capable of being accepted as valid payment for purchase of goods and services, and payment systems can be regulated by the RBI. Thus, RBI by law can protect the monetary system from threat to financial system.

Private crypto currencies like Bitcoin will be banned

The Government will shortly introduce Crypto currency and Regulation of Official Digital Currency Bill, 2021 in Parliament to ban private crypto currencies such as bitcoin as it interferes with the Central Banking system enabling private parties to toy with currencies threatening stability of the financial sector.



Views expressed above are the author’s own.


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