The Investor Education and Protection Fund (IEPF) will launch an outreach program soon to create awareness of cryptocurrencies.
Cryptocurrency
- A cryptocurrency is a digital asset that is kept in computer databases.
- To keep these digital coins secure, they are recorded in digital ledgers using strong cryptography.
- The ledgers are distributed globally, and each cryptocurrency transaction is codified as a block.
- On the distributed ledger, multiple blocks are linked together to form a blockchain.
- More than 47 million cryptocurrency users are estimated to exist worldwide.
- Mining is the process by which these cryptocurrencies are created.
What is the source of the concern about cryptocurrency?
- Caution from the RBI: The Reserve Bank of India (RBI) has suggested that legislation on the sector be drafted. It believes that cryptocurrencies should be banned.
- The crypto dilemma stems from concerns that an unregulated currency will destabilize a country’s monetary and fiscal stability.
- Involved in illegal activities: Crypto exchanges in India are also being investigated for alleged involvement in illegal activities such as drug trafficking, money laundering, violating foreign exchange legislation, and GST evasion.
- High volatility: Because cryptocurrencies are extremely volatile and work around the clock, investing in them can be a complex and risky endeavor.
Will an outreach program be beneficial?
- Regulation is required: Aside from the outreach program, the crypto sector requires a regulatory mechanism.
- The messaging must be correct: If the government takes a heavy-handed approach and declares that virtual currency is not legal in India, this will not be entirely accurate.
India’s current regulatory framework
- The Reserve Bank of India has prohibited banks and other regulated entities from supporting cryptocurrency transactions.
- The government has confirmed that cryptocurrency mining costs are considered capital expenditures rather than acquisition costs.
- The Centre introduced the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021.
Way ahead
- Because crypto assets have no borders, any legislation (whether for regulation or prohibition) would necessitate international cooperation to prevent regulatory arbitrage.
- The collaboration must include an assessment of risks and benefits, as well as the evolution of a common taxonomy and standards.
Source: https://www.indiatoday.in/cryptocurrency/story/govt-to-launch-cryptocurrency-and-online-gaming-awareness-campaign-2314226-2022-12-27