Cryptocurrency is the currency we cannot hold or touch and dealt as not physically existing. It can be traded digitally and act as an exchange medium, an accounting unit, or a value. It is something which isn’t real but still subsists. Cryptocurrency is not centralized under any particular force such as the government. The encrypted techniques are used to regulate the origination of its unit and verify the transfers and its access and Cryptography; the solving of codes is used to protect it.
Blockchain
The blockchain technology is used to maintain the details of the transactions. Today, it has millions of computers which are connected and work together at the same time. It is a digital and public ledger that records the transactions carried across several computers. The blockchain technology involves the establishment of a block which holds particular information about a specific transaction. The block, once created and the information once fed in it, cannot be altered. If any changes are to make, they will have a separate block enhancing the old data. The statistics about the same data will be collaborated with the previous block, thus creating a Blockchain. It resembles the ancient ledger system.
IMC support DLT but not private cryptocurrencies
The IMC ( Inter-ministerial Committee) was set up in India to evaluate the ability of the virtual currencies to work successfully. It acknowledges the capabilities of blockchains and DLT (Distributor Ledger Technologies) but recommended a ban on private cryptocurrencies in India. The IMC agrees on the acceptance and use of DLT internationally in the fields of trade and finance, loan applications, KYC needs, fund transfers, etc. Not only did it favor DLT but also suggested the Economic affairs department in the boundaries of the finance ministry to make its use in the finance sector. The IMC also recommended the controllers of RBI, SEBI, IRDA, PFRDA, and IBBI to explore and initiate DLT in their areas.
The private digital currencies, though having a commendable potential comes along with a few enormous drawbacks which led IMC to declare an act of banning them. The primary concern is the tendency of these to loot or defraud its users, mainly the naive and the unworldly groups. Another reason is their liability to change rapidly and unpredictably, especially for the worse. The varying value of bitcoin is itself an example. India is a country with a huge group of investors, and these disadvantages of private currencies can have adverse effects on the economy. Not only the effects but also the requirements to promote them are humongous. The enormous source of power to process them can turn into an environmental catastrophe. Moreover, if they become a legal tender, RBI would no longer be able to control the monetary and financial stability. Money laundering and use of these currencies in terrorism may be uncomplicated.
Though IMC does not support the private cryptocurrencies, it does advise to introduce an official digital currency of India. The RBI Act holds the right to allow the central government to permit a Central Bank Digital Currency as a legal tender in India.
