The cryptocurrency deception: is there need to be scrutinized.

• Crypto promoters have taken deception to a new level, with little chance of being detected because no one is offering anything.
• The strong marketing of cryptocurrencies in print and visual media in recent months may prove to be their undoing.
• Financial fraud prevention enforcement organizations like the CBI and ED will catch up with them in no time.

Can crypto then be considered a currency?

• Any instrument that wants to be classified as a currency must have the following characteristics:
• One is a promissory note, in which the issuer promises a value to the bearer or holder.
• Two, because it is backed by a sovereign nation, there is never any risk of the guarantee not being fulfilled.
• Three, money printing, whether real or digital, is always dependent on a physical item, such as gold or a basket of products.
• It is apparent from the above that cryptocurrencies will never be a currency.

Can crypto then be considered an asset?

• An asset is anything that has monetary value. An item should have some concrete advantages, even if its immediate utility is intangible.
• The cryptocurrencies that are now being touted – bitcoin, litecoin, and ethereum — are nothing more than virtual currency.
• When it comes to cryptos, proponents always bring up blockchain technology.
• Except for the fact that cryptocurrencies' digital exchange is recorded in blockchain format, this technology is essentially a system for accounting for transactions and has nothing to do with cryptocurrencies.
• Even the points obtained in a game of ludo, however ludicrous it may appear, may be portrayed as cryptocurrency if they are kept and sold via blockchain technology by the people who are monetizing these points.
• As a result, cryptocurrencies are worthless and cannot be called an asset.

India and cryptocurrency

• 2009: The first cryptocurrency, Bitcoin launched in 2009 by Satoshi Nakamoto.
• 2018: RBI banned banks and other regulated entities from supporting crypto transactions.
• 2019: Inter-ministerial committee recommended banning all private cryptocurrencies.
• 2020: SC struck down the ban on the trading of cryptocurrency as unconstitutional.
• 2021: Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 introduced.
• Under this, a plan to ban private digital currencies favors RBI-backed currency.
• A 3-6 month exit period prior to banning the trading, mining, and issuing of cryptos.
• Finally, Cryptocurrencies, though unregulated, are not illegal in India.

What is Cryptocurrency or Virtual Currency?

• A cryptocurrency is a digital or virtual currency that is protected by encryption, making counterfeiting and double-spending practically impossible.
• Many cryptocurrencies are built on blockchain technology, which is a distributed ledger enforced by a global network of computers.
• Cryptocurrencies are distinguished by the fact that they are not issued by any central authority, making them potentially impervious to government intervention or manipulation.

Blockchain Technology

• It is referred to as Distributed Ledger Technology.
• It facilitates the process of recording transactions and tracking assets in a business network.
• It is ideal for delivering the information in business because it provides immediate, shared, and completely transparent information stored on an immutable lednar that can be accessed only by permission network members. With the shared ledger, transactions are recorded only once, eliminating the duplication of effort.
• No participant can change or tamper with a transaction after it's ownership changes hands. Hence, it has been recorded to the shared ledger. The blocks form a chain of data as the no single user control.
• The blocks confirm the exact time and sequence of transactions, and the blocks link securely together to prevent any block from being altered.
• Each additional block strengthens the verification hence the entire blockchain is formed. of the previous block and The verification of each block make the blockchain tamper-evident and builds a ledger of transactions that network members can trust. . The applications that depend on the basic features of the blockchain can be developed without asking anybody for its permission or paying anyone.
• Since blockchain operates through a decentralized platform requiring no central supervision, it is used in voting, banking, messaging app, Internet advertising, etc. Hence, it is not restricted to cryptocurrency.

Various concerns against Cryptocurrencies

• Concerns about money laundering and terrorism funding have been raised several times. Other issues have been expressed on a regular basis, including:
• Central banks' concerns: Cryptocurrencies have the potential to render monetary policy ineffective and trigger significant macroeconomic upheaval.
• Unsuitable for use as a currency: Because of their volatility, they are ineffective as a means of trade. It also makes them an unstable store of value and an inconsistent unit of account.
• No fundamental value: They are a type of asset that has no intrinsic value or is not a source of dividends. The only return is the willingness of others to retain them, which increases their value. This has the potential to plummet as quickly as it rises.
• Concerns raised by the SC Garg committee (2019) include: Consumer dangers (speculative nature, no sovereign guarantee, loss of access if private key is lost, cyber risk) Money laundering and criminal conduct
• The user/holder is given anonymity.
• Concerns about money supply beyond the central bank's authority, and
• Negative influence on energy use.

Opinion: Against Cryptocurrency/ In favor of Ban.

• The Governor(RBI): He has warned against cryptocurrencies on several occasions, claiming that they pose major threats to macroeconomic and financial stability. As a result, the Reserve Bank has continuously emphasized the necessity to prohibit private digital money.
• SC Garg committee: In 2019, the government formed an inter-ministerial committee led by then-economic affairs secretary Subhash Chandra Garg, which advocated for the prohibition of private cryptocurrencies.
• Usha Thorat (former Deputy Governor of RBI): Parliament should discuss whether there is any public policy aim that justifies accepting private cryptocurrencies as an exemption at this time. Unproven financial ideas cannot be allowed to have a role in the Indian economy or among the Indian people. It is possible to consider the technology's usefulness.

Opinion: In favor of regulation

• A prior meeting convened by the Prime Minister advocated for ""progressive and forward-looking"" initiatives in the cryptocurrency area.
• Members of the standing committee on finance are apparently more in favor of regulating cryptocurrencies rather than outright banning them.
• In the case of Internet & Mobile Association of India vs. RBI, the Supreme Court of India overturned the RBI's ban on virtual currency.
• It had said that, in the absence of law, the central bank would be unable to impose significant limitations on cryptocurrency trading.
• The business of dealing in virtual currency was found to be a protected right of the profession under Article 19 (1) (g) of the Constitution in the absence of any legislative limitation.
• This might be interpreted as the SCs pressuring the government to enact rules rather than a ban.

Way Forward

• Cryptocurrencies require smart, light-touch regulation. Bans are ineffective and harm zealous invention, which may result in beneficial goods and services.
• Allow stablecoins to flourish such that no one token can gain market domination due to severe market competition.
• For online use, a digital rupee issued by RBI might be positioned as the genuine thing. It would have a distinct advantage if it had official backing. If it's well-crafted, it could be able to take advantage of the market's demand for a single standard to gain domestic dominance. This would aid the RBI in maintaining monetary policy control.
• Digitization is the way of the future, and it comes with a slew of benefits, including decreased transaction costs and the ability to conduct cross-border transactions.
• Central Bank Digital Currencies (CBDCs) must provide these features in order to prevent customers from shifting to payment systems provided by huge global companies such as Facebook.
• India might take the path of banning cryptocurrency as a medium of exchange while regulating it as an asset. On the India stack, which makes KYC relatively simple, tech-based regulation may be built. It can safeguard investors while also taxing capital gains and transactions. Volatility might be reduced via macroprudential regulation.
• Exchanges must adhere to governance, transparency, and auditing norms. Responsible advertising must emphasize the hazards, provide investor education, and raise awareness.
• Cross-border transactions can be monitored and limited in accordance with the current capital control system.