CRYPTO CURRENCY : WORLD & INDIA’S STAND
Published by: Aman Tiwari
A crypto currency is a digitalized form of currency which contains encryption as a form of cryptography to generate money and to further verify the transactions. These transactions are then added Transaction Block Chain which acts like a public ledger. Such currency is in the form of coins and each coin is created by a process known as ‘mining’. All crypto currencies around the world are primarily based on same kind of decentralized technology known as ‘blockchain’ containing inherent encryption. All across the world they have various terminologies such as in Germany they are known as crypto-token, in Mexico as virtual asset, in Switzerland as payment token, etc.
After a world wide survey, it has been noticed that various government in their respective jurisdictions have issued notices in regard to the pitfalls of investing in crypto currencies. Many of these notices are in regard to the use of crypto currencies for the purpose of money laundering and funding terrorism. They are mostly issued by central banks expressing differentiation between the actual currencies issued and guaranteed by the state andthe digital crypto currencies. This is due to the fact that many organizations which govern the various aspects of the crypto currencies are unregulated and hence any person investing in it would do so at his own personal risk. The government exempt itself and no person can avail a legal recourse in the event of loss. Countries like Australia and Canada have enacted laws relating to crypto currencies under the ambit of counter-terrorism and money laundering laws. Whereas Nepal, Algeria, Pakistan, Morocco and Vietnam have imposed a blanket ban on all activities concerning crypto currencies.
Crypto currencies have a mechanism known as Initial Coin Offerings (ICOs) to raise their funds. Some countries like New Zealand and the Netherlands have opted to regulate such mechanism while countries like China, Macau and Pakistan have put complete ban over it.
Nevertheless, there has always been a common problem in regard to crypto currencies, i.e., the taxation of crypto currencies as income or as capital gain. Israel for instance tax crypto currency as asset while Switzerland tax it as foreign currency. The United Kingdom does not have any kind of legal provisions or laws to regulate activities of crypto currencies. Germany on the other hand had its department, the German Federal Financial Supervisory Authority stated that crypto currencies qualifies as financial instruments.
TYPES OF CRYPTO-CURRENCIES
There are mainly three types of crypto currencies. Out of the three, bitcoin is the most popular crypto currency and the other two are altcoins and tokens/dApps (Bit Degree (BDG), We Power (WPR)).
Bitcoins were revealed in 2008 and since then it marked the beginning of a new era. It was revealed by a person named Satoshi Nakamoto (faux name) as a published whitepaper online. In India and across the globe bitcoins have become a means to trade goods and services through dark web. By end of 2017, bitcoins were at its peak ($20,000 per Bitcoin). It is a transferable digital currency for service or product and can be stored in bank accounts. It works in peer-to-peer network which directly links the users on one-on-one transaction. Bitcoin was also the reason behind the existence of blockchain technology which enables one-on-one transactions which the interference of any third party.
Altcoins are just an alternate version of Bitcoins with slight changeFacs. Though some of the altcoins are very different from Bitcoin in regard to algorithm used and goals or purposes. Ethereum and NEO are examples of such altcoins. They are not designed to be used as digital currency. They were initially aimed to be a platform for buildings apps on a blockchain.
Token (for dApps) is unique from the rest of the two as it does not have its own blockchain. They are mostly used on dApps which are decentralized applications which can be built on blockchains such as Ethereum and NEO. Tokens are used to purchase stuffs on the dApp or to provide certain benefits such as discounted fees and voting fees.
Crypto currency as a concept is still a gray area for many jurisdictions across the world. However, only few around the world are trying to regulate the crypto currency as financial instrument. Facebook is now planning to get involved with the crypto currency network. Facebook is now in process to reveal its crypto currency based payment system known as “Libra”. It is quite evident that entrance of a company like Facebook into the industry of crypto currency will have a huge impact in the entire functioning of the crypto currency all across globe. Facebook cannot get involved with crypto currencies unless it has blockchain which offers decentralization. Blockchains are considered as protocols which create money and transact money in the digitalized form as crypto currencies. Considering the saturation that is bringing crypto currencies to a standstill, Facebook enters with ambition to become a dominant player of an upcoming technology all around the world. Different levels of engagement by corporations is needed after the entrance of Libra. Facebook is having around 2.38 billion users across the word and initially Libra was backed by other partners such as PayPal, Spotify and Ebay, etc. which further provide massive networks and ecosystems to control the flow of users.
Countries which accept the functioning of the crypto currencies rely on some of the benefits associated with it. Crypto currencies tend to provide a unique and attractive combination of returns. They are the perfect means to diversify ones’ portfolio which consist of shares/stocks and bonds. As per the research conducted, having at least 2% of the total as crypto assets would result into boost in returns up to 200bps.Large financial institutions like Goldman Sacs, Blackrock have initiated process to develop crypto currency products exhibiting the Blockchain technology. Having such big players in the sector of cryptographic assets, the future seems bright.
INDIA ON CRYPTO CURRENCIES
India is among countries which has refused to classify bitcoins as legal tender. India recently in 2018 had took a step by prohibiting banks, lenders and many other financial regulatory institutions from indulging into any kind of activity with ‘virtual currencies’. They were issued by the RBI through a notification. A panel was formed chaired by Shri Subhash Chandra Garg, who was Secretary of India’s (Economic Affairs) in 2017, to discuss matters relating to crypto currencies. Before that, another panel recommended a complete ban on crypto currencies. The reason behind such recommendation is the same facts which other jurisdictions have also taken into consideration, i.e., money laundering, proliferator of illegal activity, aid terrorism and tax evasion.
A domestic company of India, Unocoin installed an ATM at Kemp Fort Mall, Bangalore. It is the first cryptocurrency ATM installed in India. It is for exclusive use of Unocoin customers. As per the investigation, most of the crypto currencies were a major source of cyber crimes. RBI hence keeping it into consideration decided to ban all regulated entities and banks from dealing in any form in crypto currencies. Soon after the installation of the ATM, it was shut down and the co-founder Harish was arrested. The founders were booked under Section 66 of the IT Act (Computer related offences), Section 120b of the IPC (Criminal Conspiracy), Section 420 of the IPC (Cheating), Section 465 of the IPC (Forgery), Section 474 of the IPC (Possession of forged documents), and Section 471 of the IPC (Fraudulent Use of forged documents).
IS BANNING THE SOLUTION
Dark web is a kind of digital market which functions on the same technology as that of crypto currencies. Any purchase from the dark web could be concluded by accepting bitcoins as valid mode of payment.Silk Road is one such dark web created by Ross Ulbricht in order to connect vendors of illegal drugs to their customers. It is a tor based web service which act as an escrow service by initially holding the amount of the purchase with itself and release it to the seller only after the customer satisfaction.
Some crypto currency developers tend to provide free coins or tokens to user base in an event called Airdrop. Use of social media players such as Twitter in order to keep updates on the announcement of the event. Accounts like CryptoAirdrops and AirdropAlert are some of the examples of accounts relating to airdrop.
With years passed, we have seen a lot of countries around the world opting a reluctant stance against the crypto currency by putting blanket ban on any kind of activities relating to crypto currencies. Having such volatile nature, crypto currency won’t possibly get any drastic developments and usage of the same won’t be recognized for a long period of time. People having no redressal mechanism from disputes arising upon trading in crypto currencies would always make any kind of involvement a dangerous, illegal and risky act.