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CRYPTOCURRENCY
In our ever-developing world every aspect of human life is going digital, from a thin needle to real-estate everything or anything is available in our cyberspace. Point of interest is that even in digital era money in tangible form was the base of any transaction so far. This situation was transformed with the introduction of cryptocurrency, it is a digital or virtual currency secured by cryptography, which makes sure that it is never counterfeited or spent more than once. Since they are available only in virtual world, distributed over a large number of computers systems, there is no centralised structure, which ultimately helps it to exist outside the control of Governmental authorities.The decentralized network is based on blockchain technology - blockchain technology is basically a virtual ledger enforced and adopted by various computer networks. A Market research website (coinmarketcap.com) revealed that we have more than 10,000 different cryptocurrencies circulating in cyberspace.
WHY DO WE NEED REGULATION OVER DIGITAL CURRENCY?
It has been argued and accepted by the government of different nations that cryptocurrency, blockchain and similar technology will disrupt many industries including finance and law. Among the Nations where cryptocurrency is being available for transactions only few have allowed the circulation, most of the countries have rules and regulations to restrict the use of cryptocurrency. Regulation is necessary because it has been reported that not reliable traceability of transactions made via cryptocurrency make them preferable to a person or groups involved in illegal activities such as money laundering or tax evasion.[1]
Although cryptocurrency is based on the notion that it values anonymity and have encrypted privacy from government but semi-anonymous nature of transaction also furnishes a risk of funding illegal activities without coming in the radar of government authorities.
Cryptocurrency also known as digital assets are not backed by securities or have no tangible assets attached to them. Apart from this, crypto have no guarantee of having clear intrinsic value which increases the risk of market manipulation. Lack of information combined with vague intrinsic and technological complexities requires a regulatory attention for consumer protection. Transparency as they say is the basis of trust. In the first half of 2019 International Monetary Fund (IMF) and World Bank reported digital asset presents a potential risk to investors but at the moment there is no evidence of disrupted financial stability. Regulators are required to consider monitoring the development in order to tackle emerging risk and vulnerability.
CRYPTO-RULES AND REGULATION AROUND THE GLOBE
India: In 2018 Reserve Bank of India released a circular stating a ban will be imposed on entities governed by RBI if they deal with or give services to any person of business organisation which deal or transact in digital currency. After almost 2 years in March 2020, Supreme Court of India struck down the above-mentioned circular which banned regulated financial institution from providing services to crypto, stated the circular by RBI is unconstitutional. Court examined the issue from the outlook of Article 19(i)(g) of Indian constitution.[2] After the decision by supreme court, cryptocurrency trading is now legal.
China: To curb the issue of money laundering, local financial institutions in China have been instructed by the regulatory body to not recognise digital currency as a method for any kind of payment.[3]
United Kingdom: CryptoUK is a self-regulatory trade body responsible for development and betterment of existing industry standards in reference to bitcoin by executing set of provisions related to data security and privacy.[4] Cryptocurrency aren’t banned yet but they aren’t considered as legal tender.
America: Government services in America have been classified cryptocurrency as Money Services Business (MSB). Government bodies are instructed to transact digital currency in legal terms as the crypto asset is available in derivative market of USA.
In the world of black and white, cryptocurrencies exist in the legal gray area, it has aged graciously but even now countries are facing a challenge on how to provide legal tag to something which could be used for criminal transaction because of anonymous nature and de-centralised structure. USA, Canada, Australia, European Union and few others have accepted the transactions with trace of cryptocurrency. Meanwhile, Countries such as China, Russia, Vietnam – Said clear ‘NO’ to digital currencies.
CONCLUSION
Significance, value and acceptance of cryptocurrency is changing every day with more and more people are showing interest in performing transactions using crypto available in cyber world. This increase in development and demand of digital currency explicitly call for regulation or regulatory bodies. As of March 2021, total market cap of Bitcoin (most prominent cryptocurrency) is estimated at 927 billion dollars.
Government always fear from activities which are outside the purview of their jurisdiction, in case of cryptocurrency the concern of consumer protection is significant. Very fact that makes cryptocurrency unique is also the point of conflict i.e. Anonymity. In the beginning of the article it was stated “everything is going digital”, it definitely includes the activities of criminal groups. Semi-anonymous nature makes it nearly impossible to trace the transaction origin. Illegal acts such as money laundering, transnational organised crimes, tax evasion etc. are the reasons behind Government’s dilemma to whether sanctioning legal acceptability of cryptocurrency is the right step to take or not?
Above mentioned reasons prove the requirement of regulatory body,if government wants to allow crypto as legal tender but at the same time the curbing of criminal activities using digital currency have to be keep in check.
End-notes [1]Roy Richa, “The need to regulate cryptocurrencies is loud and clear”, livemint.com, Available at - https://www.livemint.com/opinion/online-views/the-need-to-regulate-cryptocurrencies-is-loud-and-clear-11610555985823.html (Accessed on - 1 June 2021) [2]Internet and Mobile Association of India v Reserve Bank of India, 2020 SCC Online SC 275 [3] “Regulation of Cryptocurrency Around the World”, The Law Library of Congress, June 2018, Available at - https://www.loc.gov/law/help/cryptocurrency/cryptocurrency-world-survey.pdf (Accessed on - 1 June 2021) [4]ibid
What is the proposed plan regarding protection of monetary transactions as far as cryptocurrency is concerned keeping in mind lack of codified laws on right to privacy in India ? What do you suggest ?