Currency and coins prevalent for transactions in a country are called currency. The prevailing currency is either of paper or of any metal. For example, rupee notes and coins in America. The concept of virtual currency has also emerged after the proliferation of information technology in recent years. For example Bitcoin, Litecoin, Ethereum. Such virtual currency is called cryptocurrency.
Actually cryptocurrency is a currency that is issued privately as a digital medium. It was first used in the year 2009. It works on the basis of Distributor Laser Technology (DLT) like cryptography and blockchain. Simply put, blockchain is a bookkeeping in which transactions are recorded as blocks and linked using cryptography. Cryptography is a secure way of saving and sending information in which the code is used and only that person can read the information for which it is sent.
When a company starts currency, limited companies sell ICOs (Initial Coin Offerings) to potential buyers on the lines of IPOs and crowdfunding to raise capital from the market. It is important to understand here that there is a big difference between cryptocurrency and real currency. For example, the central bank that issues real currency offers a guarantee of its payment, whereas cryptocurrency does not. This is the reason why investing in cryptocurrency is considered very risky. The rate of cryptocurrency fluctuates rapidly. For example, the market capitalization of bitcoin decreased by about $ 200 billion recently. That’s why cryptocurrency is not considered a reliable means of transacting and holding funds. The government and the Reserve Bank of India have been continuously raising concerns about virtual currencies like bitcoin.
The RBI believes that cryptocurrency can affect the existing payment system which will ultimately affect the implementation of monetary policy. There is also a danger that due to the entire transaction being done digitally, there is a risk of its being hacked. There is also no mechanism for resolving customer problems and complaints. In addition, cryptocurrency is also suspected to be used in illegal activities like tax evasion, money laundering and terrorist funding. The international body ‘Financial Action Task Force’ has expressed this apprehension.
The Bank of International Settlement (BIS) has even said that cryptocurrency is a bubble that can erupt at any time. In fact, it is similar to the Ponzi scheme.Bank of International Settlement (BIS)
Steps have been taken to regulate cryptocurrency worldwide. Half of all bitcoin transactions in the world are done in Japan. Japan approved transactions in the cryptocurrency exchange in September 2017. The US has also made rules but there is no sanction there. In India, both the government and the Reserve Bank are monitoring cryptocurrency. The Reserve Bank has formed an interdepartmental group, which will study the possibilities of introducing digital currency. However, what India decides in this regard, it will be known only later. The stand of the government and the Reserve Bank so far is against them. People have been warned many times by the government to stay away from them.