In News: Union Finance Minister stated that Crypto legislation can only work with global collaboration
She stated that a law to regulate or ban cryptocurrencies can only be effective once there’s some form of international agreement in place.
Finance Minister Statement in Parliament signals law on cryptocurrencies may be off the table for now.
What is Cryptocurrency?
Cryptocurrency, sometimes called crypto-currency or crypto, is any form of currency that exists digitally or virtually and uses cryptography to secure transactions.
Cryptocurrencies don’t have a central issuing or regulating authority, instead use a decentralized system to record transactions and issue new units.
It is supported by a decentralized peer-to-peer network called the blockchain.
Benefits of Cryptocurrency
Inherent security: Use of pseudonyms and ledger systems conceals the identities.
Low transaction cost: Very low fees and charges for transactions.
Lack of interference from the banking system: Outside ambit of banking systems.
Lower Entry Barriers: No entry barriers, unlike conventional banking systems.
Universal recognition: Lots of cryptocurrencies and acceptable in many nations.
Challenges
Security risks: Cyberattacks on wallets, exchange mechanism (Cryptojacking).
Shield to Crime: Used for Illicit Trading, Criminal Activities, & organised crimes.
Threat to the domestic currency: If a large number of investors invest in digital coins rather than domestic currency based savings like provident funds, the demand of the latter will fall.
Lack of Liquidity and Lower Acceptability: Outside the traditional banking systems.
Price Volatility: Prone to price fluctuations & waste of computing power.
Lack of Consumer Protection: No Dispute Settlement Mechanisms and control of Securities and Exchange Board of India (SEBI).
