Virtual Currency or Virtual Money is a largely unregulated and issued digital currency and is generally controlled by its developers and used & accepted electronically among the members of a specific virtual community. In 2014, the European Banking Authority defined virtual currency as “a digital representation of value that is not issued by a central bank or public authority, nor necessarily linked to a fiat currency, but is accepted by people physically or legal as a means of payment and can be transferred, stored or exchanged electronically. ”A digital currency issued by a central bank is known as a central bank digital currency.
A cryptocurrency or crypto is a collection of binary data designed to function as a medium of exchange. The ownership records of the individual coins are stored in a ledger, which is a computerized database that uses strong cryptography to protect transaction records, control the creation of additional coins, and verify the transfer of ownership of the coins. Cryptocurrencies are generally fiat currencies, as they are not supported or convertible into a commodity. Some cryptographic schemes use validators to hold the cryptocurrency. In a proof-of-stake model, owners place their tokens as collateral. In return, they gain authority over the token in proportion to the amount they wager. These token bettors generally acquire further ownership of the token over time through network fees, newly minted tokens, or other similar reward mechanisms.
Cryptocurrency does not exist in physical form (like paper money) and is generally not issued by a central authority. Cryptocurrencies typically use decentralized control rather than a central bank digital currency (CBDC). When a cryptocurrency is minted or created prior to issuance or issued by a single issuer, it is generally considered to be centralized. When implemented with decentralized control, each cryptocurrency works through distributed ledger technology, usually a blockchain, which serves as a public financial transaction database.
A cryptocurrency is a tradable digital asset or form of digital money, built on blockchain technology that only exists online. Cryptocurrencies use cryptography to authenticate and secure transactions, hence their name. There are currently more than a thousand different cryptocurrencies in the world, and many see them as the key to a fairer future economy.
Why do we need a law?
I know some people who have been investors in cryptocurrency for the last year. Some made good profits out of it by investing at a lower price when the trend for crypto began in India. Covid19 Pandemic badly impacted the financial balance that forced us to search for earning sources that could provide us with a penny in our pocket.
India ranks second globally on investors’ list of cryptocurrencies and has shown a dominant position in displaying the acceptance of digital transformation in the country. On the other hand, the Government of India has no interest in accepting cryptocurrencies lawfully. There have been rumors circulating for a long time regarding the complete ban on crypto trading in India. Well, the government has been saying this for a long time and even a few responsible ministers stated that ‘at least, for now, there won’t be any positive news for crypto-asset holders as it poses a direct threat to our monetary and fiscal budget’.
Money laundering is the most prominent reason for not showing trust in it. Of course, the blockchain system is currently the most secured digital transaction system; but, it has no centralized authority that could manage the data being stored in it and protect the integrity of every sovereign nation.
The concerns are simple: terrorist organizations received funding from different corners of the world in regular currency. It is tough or almost impossible to track that currency’s circulation, but the government’s financial agencies can somehow locate the transactions being executed in bank accounts and monitor them under their formal structure.
Crypto does not provide such a facility as the centralized banking system does, due to which it is still disliked by many governments around the world. India’s public has become more aware of the fact that technological advancement can only furnish their dreams of financial independence.
– By Parag Ahire