Govt of India and the Crypto currencies
- November 11, 2021
- Posted by: OptimizeIAS Team
- Category: DPN Topics
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Govt of India and the Crypto currencies
Subject – Economy
Context – Reserve Bank of India (RBI) Shaktikanta Das sounded alarm on cryptocurrencies, cautioning investors on the potential pitfalls of the digital currency.
Concept –
Is cryptocurrency trading regulated by the Govt of India now? – No.
- The exchange platforms enabling trading of cryptocurrencies (bitcoins, etherium, litecoin, dogecoin) such as Wazirx, CoinDCX, Coinswitch Kuber are not operating under the supervision of any regulatory body under the Government of India.
- Neither the RBI nor SEBI regulates them.
- The exchanges have formed rules, including KYC requirements, that investors need to fulfill.
- But these are not watertight, and there have been many cases of money-laundering and other malpractices through the exchanges.
How has the government approached cryptocurrency regulation in the past?
- No country in the world, including India, has a comprehensive regulation for cryptocurrency trading.
- While China banned crypto trading and mining recently, other countries have not issued a complete ban on these activities yet.
Will cryptos get a currency status?
- Private crypto currencies cannot be a fiat currency because they do not have any underlying assets backing them, and the price is discovered through demand and supply dynamics alone.
- Second, there is no sovereign guarantee.
- Finally, the prices are too volatile to be considered as legal tender.
What is the RBI’s stand?
- The RBI is very worried about money laundering risks through these private cryptocurrencies, and has expressed the concerns to the Centre.
- The Centre has to now pass a law to regulate them.
- The RBI is also working on an official digital currency, which will be official legal tender.