Cryptocurrency called the currency of the future is already at that point where its full potential should be realized. However, there are certain fundamental traits about the currency that is holding the growth back. The significant issues linked to these currencies are its price volatility, high transaction fees, unregulated nature lack of traceability, etc. Cryptocurrencies have their place in the domain of trading due to their price volatility.
Now the question that arises is that ‘is banning cryptocurrencies the only solution?’
Even if cryptocurrencies have so many problems, they have been in use and existence worldwide. Banning these can’t be the ultimate solution as people will still be able to somehow access it, e.g., via VPNs or foreign banks. Rather than banning the cryptocurrencies, the Government must work on taking it under control and regulation. Let us take deeper insights into the how’s and whys of it.
First of all, a ban on any fully digital currency will show up a lack of understanding of the currency’s positive sides on the Indian Economy. Unlike the regular currency, cryptocurrencies are not centralized, regulated, monitored, or tracked. The last four problems can be easily solved. The Government can regulate, monitor, centralize, and track these digital assets. For more information visit Immediate Bitcoin.
The solution to the problems lies in setting up a Central Bank Digital Currency (CBDC). RBI can take control of it as it controls the functioning of other Banks. Once RBI takes it under control, this digital currency’s reliability will rise exponentially among the general consumers. If these currencies become the mainstream, it’ll be much easy to push India into a fully cashless society.
Nations like China, Canada, Sweden, Switzerland, Singapore, and others are developing their own CBDC (some also running it currently as a pilot project). The volatility won’t be an issue anymore once the transactions of these cryptocurrencies happen via CBDCs.
The CBDC will undoubtedly reduce black marketing, as cryptocurrencies are reportedly being used for terrorism, weapons, and other crimes. A significant fraction of the money laundering problems will be solved once the cryptocurrencies are under control. Once regulated, it will be called a crypto rupee. The regulation will also bring competition among the available cryptocurrencies, and it’ll ultimately benefit the end consumer.
A DLT (Distributed Ledger Technology) will be the method to be used in this. A DLT means that every transaction, no matter how small, will have to pass through an additional check. Setting up a DLT will make an individual’s cryptocurrency wallet impossible to hack, unlike any traditional online wallet. This security level can be multilayered with a centralized system.
The development of cryptocurrency businesses like ICOs (Initial Coin Offerings), STOs (Security Token Offerings) will help in making an environment of the blockchain system. The blockchain system will help in the regulation of many other assets of the nation.
For instance, take the example of real estate. There have been numerous cases where land ownership has been given to two or more people due to the mishandling of Data. If all the records of the lands are digitized, the liquidity will increase manifold. This change in the system of record making will open the gates of Foreign Direct Investments in Real Estate.
ICOs are beneficial for startups to raise funds. Many investors prefer to fund startups via cryptocurrency. The much-unregulated crowdfunding can also be regularized via introducing a centralized and DLT enabled transaction into the system.
The Indian Government can take the following steps to regulate the ICOSs:
- Limiting the investment amount.
- Ordering the tokens being issued through an ICO to be under the purview of the Securities Exchange Board of India
- Making it compulsory for the ICO issuer to propagate their project on SEBI official Website.
- Bringing the transactions of coins under the gambit of Prevention of Money Laundering Act, 2002.
Taking about the STOs, the Government could treat such STO as any other security and can amend the Securities Contract Regulation Act, 1957 to bring STOs under the framework. SEBI can take care of the STOs and regulate them.
The solution to laundering the crypto assets’ issues can be regulated by the Prevention of Money Laundering Act, 2002 (“PMLA”).
Cryptocurrency is slowly moving into the mainstream globally. It’s the best time for India to focus on it to be competent enough with other developing and developed nations.
Above all, a lot of businesses are running partly in cryptocurrency. A ban would lead to a sudden drop in the market, which can be avoided.