What is the New Crypto Bill (#GS III)

Context:

  • In the winter session of Parliament, the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, will be introduced.

Important Requirements:

  • It aims to regulate bitcoin and, apparently, prohibits the use of private cryptocurrencies.
  • Its goal is to establish a framework that will make it easier for the Reserve Bank of India to launch an official digital currency.
  • So far, the Bill's particular contours have not been made public, and no public discussions have taken place.

The current situation is as follows:

  • In India, an inter-ministerial commission on cryptocurrency has suggested that all private cryptocurrencies be banned, with the exception of state-issued virtual currencies.
  • The Reserve Bank of India (RBI) has also expressed worries about cryptocurrencies traded in the market, which it has conveyed to the government.
  • The Supreme Court authorised banks and financial institutions to resume services linked to cryptocurrencies in March 2020, overturning the RBI's 2018 circular prohibiting them (on the basis of "proportionality").

What are Cryptocurrencies and How Do They Work:

  • Cryptocurrencies are digital currencies that operate independently of a central bank and employ encryption techniques to govern the production of units of money and verify the transfer of funds.
  • Bitcoin, Ethereum, and other cryptocurrencies are examples.

Why does the government want to outlaw cryptocurrencies:

  • Consumer protection: Cryptocurrencies pose a threat to consumers. They are not legal tender since they lack a governmental guarantee.
  • Market volatility: Because of their speculative nature, they are extremely volatile. Bitcoin, for example, has dropped in value from USD 20,000 in December 2017 to USD 3,800 in November 2018.
  • Risk in the field of security: If a user's private key is lost, they lose access to their cryptocurrency (unlike traditional digital banking accounts, this password cannot be reset).
  • Malware threats: In some circumstances, technical service providers (cryptocurrency exchanges or wallets) store these private keys, which are vulnerable to malware or hacking.
  • Laundering of funds.
  • Source : THE HINDU.
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