Cryptocurrency bill and challenges
- March 6, 2021
- Posted by: OptimizeIAS Team
- Category: DPN Topics
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Cryptocurrency bill and challenges
Context: The Internet and Mobile Association of India (IAMAI) has claimed that the secrecy shrouds proposed Cryptocurrency and Regulation of Official Digital Currency Bill, 2021.
Concept:
About cryptocurrency
- Cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. Many cryptocurrencies are decentralized networks based on blockchain technology—a distributed ledger enforced by a disparate network of computers.Ex- Bitcoin and Ethereum
Additional info
- IAMAI said that the draft bill hardly saw any effort towards consultation.
- The law is proposed for existing laws to deal with cryptos are inadequate.
- It plans to introduce a law banning trade in all cryptocurrencies — except for those issued by the government itself
- In 2018, the Reserve Bank of India (RBI) had issued a circular banning the provision of banking services to any entity using cryptocurrencies (it was indirectly an end to all crypto exchanges functioning in the country)
- The Supreme Court (Internet and Mobile Association of India vs RBI), however, struck the circular down on grounds of proportionality.
- The Doctrine of Proportionality entails that any public authority must maintain a sense of proportion between the goal it wants to achieve and the means it employs to achieve it.
- The S C Garg Committee on cryptocurrencies had earlier raised various concerns around such assets, holding the same view of a blanket ban. Among the issues raised was that cryptos do not have any of the benefits of fiat currency; and that they have a degree of pseudo anonymity.
Challenging the ban constitutionally and otherwise
- The current challenge to the bill is also on ground of doctrine of proportionality.
- Right to trade in cryptos under Article 19 of the Constitution, which was recognised in the IAMAI case
- the right to property, especially since the apex court has previously recognised crypto assets as “intangible property”
- Challenge to right to free speech and expression (as US courts have previously said that the encryption software in its source code form must be protected by the First Amendment)
- Arbitrariness of decision by banning it violates right to equality under art 14. Ex- In creating a Central Bank Digital Currency and banning all others, the Centre may be accused of being arbitrary
- Differentiation between public and private cryptos is vague and confusing
- value-transfer role does not mean it has to be a fiat currency, such as in the case of gold or even a loyalty points system, which can coexist with other legal tender.
- Pseudo anonumity also does not hold as law enforcement has been successfully able to trace offenders by analysing blockchain and de-anonymizing transactions.
About fiat money
- Fiat money is government-issued currency that is not backed by a physical commodity, such as gold or silver, but rather by the government that issued it.