06. Crypto-currency such as Bitcoin must be banned. Each country has its own sovereign currency
What is your Opinion : Yes or No?
Why is it so? = Pick Pointers for your arguments
| Yes | No |
|---|---|
| Requires significant investment as well as difficult policy choices, such as clarifying the role of the public and private sectors in providing and regulating digital forms of money. | New digital forms of money have the potential to provide cheaper and faster payments, enhance financial inclusion, improve resilience and competition among payment providers, and facilitate cross-border transfers. |
| Cryptoassets are privately issued tokens based on cryptographic techniques and denominated in their own unit of account. Unlike digital currency which is pegged to sovereign currency, their value can be extremely volatile and speculative. No inherent value. Bitcoin, for instance, reached a peak of $65,000 in April and crashed to less than half that value two months later. | Crypto-currencies are becoming popular. Return is highest among all assets. Helps digital penetration - Spread is across sections - women, students, tier-2/3 cities. But identity of consumer is not known which is an issue. Even we don’t know who are providing these. These issues need resolution but not ban. |
| To protect national sovereignty, it is important not to grant crypto assets official currency or legal tender status. Doing so would require accepting them in many jurisdictions for tax payments, fines, and debt settlements, and could generate fiscal risks for government finances, and could
threaten financial stability or rapid inflation.
Absolute catastrophe – the ‘asteroid-destroying-earth’ scenario – for a central bank would be the loss of control of monetary policy- if use of cryptocurrencies were to outstrip that of a sovereign currency – if cryptos were to become more mainstream and trusted than the country’s national currency . |
Blockchain technology is most robust and secure. Hence, even if a node is affected, doesn’t impact the whole network. Also, it is difficult to hack. Can make digital payments secure. It is like TCP/IP of internet economy.
So not legal tender but should be used as digital asset . |
| The most direct cost of widespread adoption of a cryptoasset such as Bitcoin is to macroeconomic stability. If goods and services were priced in both a real currency and a cryptoasset, households and businesses would spend significant time and resources choosing which money to hold as opposed to engaging in productive activities. Similarly, government revenues would be exposed to exchange rate risk if taxes were quoted in advance in a cryptoasset while expenditures remained mostly in the local currency, or vice versa. As a result, domestic prices could become highly unstable. Even if all prices were quoted in, say, Bitcoin, the prices of imported goods and services would still fluctuate massively, following the whims of market valuations. | Crypto-currency need not be banned, need not be legal tender. They are issued by private entities and are private assets. They need to be regulated. Crypto currency exchanges need to follow KYC and anti money laundering.
Even legal tender is not backed completely by liquidity, same is the case with crypto. Issues arise mainly when these are used for investment purpose . |
| Financial integrity could also suffer. Without robust anti-money laundering and combating the financing of terrorism measures, crypto-assets can be used to launder ill-gotten money, fund terrorism, and evade taxes. This could pose risks to a country’s financial system, fiscal balance, and relationships with foreign countries and correspondent banks. | Need international regulation, national wont suffice due to nature of technology. It should be treated as an asset and then it will add to tax revenue of country and gains will be accounted for. KYC will identify people and blockchain will help keep account of all transactions. |
| Finally, mined cryptoassets such as Bitcoin require an enormous amount of electricity to power the computer networks that verify transactions. The ecological implications of adopting these cryptoassets as a national currency could be dire. | Printing currency also consumes electricity. Renewable sources will solve this problem. |
| Failures of the FTX crypto trading platform and the Terra Luna stablecoin. These routs could spill over into the ‘real’ economy, and upset traditional banking, potentially with profound effects upon national financial systems. To date, traditional banks have largely weathered the storm. | India has brought crypto transactions and other digital assets under money laundering regulation PMLA. Crypto transactions are also taxed now. So, government is also going towards recognizing them. |
Some Additional Data Points You should know for opinion building :
Cryptocurrencies are unregulated digital money which are valued subjectively and not issued or guaranteed by a central bank. E-money, on the other hand, is understood to refer to digital representation of fiat currency which is backed by cash and issued by private institutions. Unlike e-money (which is issued against cash) and virtual currencies (which have no intrinsic value), CBDCs are legal tender, albeit in digital form, that are issued by the central monetary authority and constitute a central bank liability.
First country to make crypto-currency as legal tender was El Salvador
.The global push for clearer policies on crypto assets has gained momentum under the Indian G20 Presidency
.Milton Friedman declared back in 1999 digital currency would exist beyond the control of national authorities – and anyone else.
Early efforts at creating digital cash—such as DigiCash (1989) and e-gold (1996)—were issued by central agencies. The emergence of Bitcoin in 2009 dramatically altered this model in two important ways: by establishing a decentralized (blockchain-based) ledger for transaction execution and record keeping, and by creating a (now) widely traded currency outside the control of any sovereign monetary authority. Thousands of similar decentralized cryptocurrencies now exist, collectively generating billions of dollars in global transaction volume every day.
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Balanced Conclusion / Way Forward :
As national currency, cryptoassets—including Bitcoin—come with substantial risks to macro-financial stability, financial integrity, consumer protection, and the environment. The advantages of their underlying technologies, including the potential for cheaper and more inclusive financial services, should not be overlooked. Governments, however, need to step up to provide these services, and leverage new digital forms of money while preserving stability, efficiency, equality, and environmental sustainability. Attempting to make cryptoassets a national currency is an inadvisable shortcut.
The adoption of CBDC is seen as a policy response to counteract the effects of the rise in use of cryptocurrencies, which threatens the central bank’s monopoly over the money supply and hinders its ability to effectively implement its monetary policy. It is also believed to have the potential of improving existing financial systems, including interbank and cross-border payment and settlement systems. Further, since CBDC is in digital form and can be designed to allow for digital records, it is seen as a means to reduce informal economic activities, such as money laundering, and provide data on the market economy.
Given the borderless nature of the crypto-assets ecosystem, international collaboration and information sharing are crucial. Cooperation among competent authorities will enable the monitoring of crypto-asset service providers and maintain the efficacy of regulatory policies.
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