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Regulating Cryptocurrencies - Coggle Diagram
Regulating Cryptocurrencies
What is Cryptocurrency?
Works on blockchain technology
It uses strong cryptography to secure transaction records
Individual coin ownership records are stored in a ledger
It does not exist in physical form
A digital asset designed to work as a medium of exchange
Status in India
It has banned banks from facilitating transactions
RBI’s order was overturned by the Supreme Court in 2020
RBI opposed to the idea of legalizing cryptocurrencies
Why did RBI propose a ban?
RBIs stake in monetary policy
Digital Rupee is in the pipeline
Threat to the sovereignty of the rupee
Competition of currencies
Cryptocurrencies as a threat to financial stability
Legislative opinion
Making a legal framework
Taxing cryptocurrencies
Not in favour of ban
Why regulate over ban?
Revenue generation
Boosting with policy
Capitalizing the market
Lack of evident threat
Financial innovation
Popularity amongst Public
Issues with the ban
Capital inflows will be restricted
Killing of an financial innovation
Exodus of both talent and business from India
Other generic concerns
Financial integrity (money laundering and evasion of capital controls)
Energy usage (outsized energy needs to mine cryptos)
Safety (cyber-attacks and fraud)
Way forward
May be accepted as speculative assets
Limited acceptance by govt
Cannot replace Rupee
It is better classified as an asset rather than as a currency