Listen to RBI On This, GoI

Context: Supreme Court showed in haste strikes down RBI’s April 2018 circular that prohibited regulated banks from dealing with cryptocurrency transactions.

Challenges associated with Cryptocurrencies:

• Threat to ‘macroeconomic and financial stability’: As cryptocurrencies were built to enable easy countertrade across borders and to circumvent the plodding safeguards of the financial system.
• Promotes money-laundering: Due to lack of proper anti-money laundering apparatus, or infrastructure to safeguard both institutions and citizens against fraud.
  • In future cryptocurrency exchanges may be  used by more than common or garden criminals, and less than upright public figures, to game the system and evade government restrictions.
• Can challenge the supremacy of a fiat currency.

Issues associated in regulating cryptocurrencies

• Decentralised and open source-based nature of cryptocurrencies: As anything that is accessible to everyone, or is made available on the cloud, can never be fully tamed.
• Not currency, but assets approach of government towards crptocurrencies:Like enabling cryptocurrencies as investments like shares, bonds and gold, while prohibiting their use as legitimate transactional currency.
• Various misunderstanding posing challenges of oversight and monitoring: Like Cryptocurrency would challenge the supremacy of a fiat currency but cryptocurrencies, promoties  the aim of seamless payments, of a central bank 
• Technical misunderstanding: Like cryptocurrency is a technology instead of  Blockchain i.e. continues to thrive and grow outside the heady world of cryptocurrencies.
• Popularity of Blockchain: Blockchain’s growth and acceptance is making it difficult to ban cryptocurrency. Block chain  is used by companies
  • for Management of contracts, the verification and authentication of raw material sourcing, digital identification, retail loyalty and rewards management programmes, data-sharing etc.

Conclusion: Cryptocurrencies are almost impossible to regulate. Banning them is easier than standing up expensive and extensive surveillance architecture. But ,GoI has no business deciding the fate of cryptocurrency so it should let the more knowledgeable RBI have its way on this matter

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