Cryptocurrency

Cryptocurrency: The good, the annoying, and the downright scary – Economic Times

Summary

Even the beginnings of cryptocurrency were cryptic. Satoshi Nakamoto invented it in 2009, but we don’t know for sure whether that was a person, a group of people or just a pseudonym. It was christened bitcoin. Coming as it did just after the 2008 financial crisis, it could well have been a reaction to the dominant thinking then that governments had failed their citizens. We now have a peer-to-peer digital system that operates outside the traditional, regulated finance and banking system, designe…….

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Even the beginnings of cryptocurrency were cryptic. Satoshi Nakamoto invented it in 2009, but we don’t know for sure whether that was a person, a group of people or just a pseudonym. It was christened bitcoin. Coming as it did just after the 2008 financial crisis, it could well have been a reaction to the dominant thinking then that governments had failed their citizens. We now have a peer-to-peer digital system that operates outside the traditional, regulated finance and banking system, designed to give the individual more control over his own money.

Digital money as currency of the future has captured the imagination of young people across the globe, ignited by the digital transformation they’re witnessing across industry – and excited by an alternative to government currencies, with the freedom to use it across borders. It has attracted many speculators, who don’t want to miss out on the opportunity to make a fast buck and grab bragging rights.

Crypto has attracted many technology buffs too. Take the case of Ishaan and Aanya Thakur based in Frisco, Texas. In October this year alone, they made over $64,000 (₹47.96 lakh) from crypto-mining. They learnt how to mine from the internet and videos. They set up over 200 processors and specialised bitcoin-mining machines, processing ‘more graphics transactions than Nasa can’, according to Ishaan. Ishaan is 14 years old and Aanya is 9.

Various Indian crypto exchanges like CoinDCX, CoinSwitch Kuber and WazirX have sought to convert a trend into a raging fever, spending over ₹50 crore during the recent ICC T20 World Cup. That set off many alarm bells. Several high-level meetings have happened, including one chaired by the prime minister. The Advertising Standards Council of India (ASCI) will be asked to ensure adequate disclosures and statutory warnings.

Legal experts have raised red flags against claims of guaranteed returns. Celebrities have been told about the liabilities they will incur in the case of fraud, and bankers are reaching out to customers warning them about the fragility of this asset class. That crypto-nerds and crypto-enthusiasts can shake the government, its policies and traditional institutions, is alarmingly clear. And, yet, crypto trades continue to grow rapidly, with over 1.5 crore investors reportedly holding ₹15,000 crore of digital assets.

Thrilled to Bitcoins

The first reaction of governments is to impose a ban. That could work in a command economy like China, but is practically impossible to do in India, especially in respect of this decentralised, open-source system.

On April 6, 2018, the Reserve Bank of India (RBI) issued a circular prohibiting regulated banks and entities from providing services related to cryptocurrency. On March 4, 2020, the Supreme Court struck down that circular, allowing crypto exchanges to use banking channels. El Salvador, at the other end of the spectrum, has legalised bitcoin use for daily transactions through a state-sponsored digital wallet. Further, President Nayib Bukele led a week-long event to promote bitcoin, and announced plans to build a ‘Bitcoin City’ funded by bitcoin bonds to harness crypto investments.

Central banks are …….

Source: https://economictimes.indiatimes.com/opinion/et-commentary/cryptocurrency-the-good-the-annoying-and-the-downright-scary/articleshow/87937838.cms