There has been ambiguity over whether crypto is treated as a script, currency, utility, or commodity. In cryptocurrency, a blockchain is a decentralized ledger of all transactions over a peer-to-peer network. Participants can confirm transactions using this technology without requiring a central clearing authority.
Cryptocurrencies will continue to exist in various forms, such as floating currencies, stablecoins and digital coins issued by central banks. The technological base upon which cryptocurrencies operate can serve as the cornerstone for altering large-scale payments. The character and scale of significant international transactions can be modified with the effective adoption of Blockchain. While this technology has enormous potential, there are underlying difficulties, such as high-power consumption compared to traditional payment methods. The forthcoming economic models will incorporate Cryptocurrencies and Blockchain from the start, significantly impacting national economies and GDP.
Usage of Blockchain
There has been ambiguity over whether crypto is treated as a script, currency, utility, or commodity. In cryptocurrency, a blockchain is a decentralized ledger of all transactions over a peer-to-peer network. Participants can confirm transactions using this technology without requiring a central clearing authority. As far as technology is concerned, blockchain plays a significant role in cryptocurrency operation due to its inherent advantages, which likely boost the transparency of transactions due to their decentralized character. On the other hand, it is as safe as it appears, and blockchains are secure. For example, if a layperson truly wishes to view the data shared within an entire blockchain, all that is required is access to one of its nodes. However, widespread use of blockchain has yet to take hold, owing to the complications involved. Apart from banking and cryptocurrency, blockchain has the potential to be used in a variety of different industries. The high cost of adoption involves transparency, possibly a lack of precise regulation, privacy, or security of data shared on a distributed ledger.
Noise Around Adoption of Technology
Currency and blockchain are subsets of distributed computing. Disruption is inevitable when all clients, businesses, and regulators are dissatisfied, leading to criticism of established economics or finance. All three are unhappy with crypto as foreign models do not apply to India. India has evolved into a magnificent democracy and federal system. Two of the five economies have grown to be enormous and are disturbing all areas of any economic stratum in the global economy. One is the creator, and the other is the GIG economy, and oddly, India isn’t leading in any of them even today. Look at the demographic, growth, or GDP contribution aspect. India should lead the globe out of five economies, bringing a lot of vitality to the economic paradigm. As the largest democracy in the world, India needs to stop looking to others for guidance. Instead, debate and policy should concentrate only on two significant issues: citizens’ rights and fate/traits. If this focus is maintained, making procedures will be much simpler, and distributing rational computing components will make much more sense.
Shortcomings in the Regulation of Crypto
Since everyone now refers to cryptocurrency as “crypto” rather than “cryptocurrency,” it is essential to distinguish between them. If you identify crypto as an asset, the SEBI rules, IT rules, and other regulations will all be followed. Blockchain technology is influenced by the concern that the regulatory issue surrounding cryptocurrencies is resolved. Blockchain is a superior technology that will soon be used in the financial sector and databases. Blockchain is developing independently, and the current IT Act is not impeding its development. Once done, no one can tinker with this blockchain database; it is like a permanent itch on the rock. It is easily accessible and it makes participation easier. More people use it, more people innovate on it, and more people advance with it. Therefore, the IT Act is currently sufficient to permit this innovation. The stakeholders should brief parliamentary committees on all of these points of issue. Many of the e-commerce policies and other policies that are causing a lot of problems need to be resolved or withdrawn by some of the ministries.
Blockchain influences industries.
The blockchain-based currency was built for cross-border payments and remittances, not speculative purposes. Every cross-border transaction must go via the dollar, increasing the cost of currency conversions by 4%. They seek to weaken the dominance of the dollar. When there was an imbalance between supply and demand, speculation took place. However, cryptocurrency has been used to fund terrorism and other activities without authority. The fundamental premise of cryptocurrencies was their anonymity, lack of regulation, and mystery surrounding their origins. The other party cannot see transactions, but it is crucial to sit down and set up an exchange before deciding who will be in charge of the settlement and risk tomorrow. Since cryptocurrencies don’t have fundamental value, regulation and oversight are required to prevent individuals from adopting misguided views about them.
Crypto as an asset and technology
A clear distinction has been made in India and crypto is not seen as a currency; the RBI will create digital money to handle cross-border transactions and strengthen the rupee in the upcoming year. In India, cryptocurrency will never be treated as legal tender. Digital currency, CDBC provided by the RBI, and cryptocurrency would be considered assets, like any other assets in the securities market, with no protection, unlike fixed-deposit investments. The regulator would define it accordingly, and income tax and GST would become payable. It is the scenario being discussed in the parliamentary committee with the decision-makers and financial institutions. However, it has been made plain that this division is not monetary.
Regulation of cryptocurrency as an asset is plainly necessary as many investment frauds exist. Then there are two sides to the debate over technology: one side favors regulation, while the other is opposed to it. Although technology in the past has been regulated, and contemporary technology also has to be governed, crypto is a unique form of technology. Crypto delivers three promises: frictionless payment, which many nations welcome; second, it eliminates information asymmetry, which is why ledgers appear, although India doesn’t require those; third, it offers confidence and future promise. So, the two key components are provenance and trust. The other side of the argument is that asset prices are highly rational; nevertheless, we all know that cryptocurrency prices are illogical because they are entirely speculative. However, the critical question is whether India will be among the developing world’s early adopters of digital technology.
Bottlenecks of Blockchain technology
Open source blockchain technology, which may have appeared a decade ago, is continually developing. Since the underlying technology will evolve and there are still numerous applications to be developed, there will be a significant advancement in this area. There is quite some ambiguity surrounding its consequences; technology should be seen as a force for change rather than a tool. This technology also influences how we think and how we operate. These technologies are subject to network effects, very strongly. Since it is an open-source technology, anyone can start utilizing the additional thousands of worthless currencies. Because of network effects, a large number of them will vanish. For regulatory reasons, the focus is only on one or two of them.
Whether you’re dealing with assets or currencies, a blockchain has six components: the principal, participants, consensus, mechanism, speed, and regulations. Public and private blockchains are the two main types that are now evolving. All these six aspects are not suitable for India. India has a significant advantage over other countries because of its democratic system, which works well, and financial inclusion has been implemented. There is an opportunity to develop new rules that need consent from all participants, whether public or private. Whether we like it or not, there must be a hierarchical structure. The third is ownership, which is debatable whether a business or an institution can carry it out. Finding those who are also Indian citizens and who are on the other side of the digital divide is crucial because their opinions should count. One distinction between existing platforms and what blockchain nodes offer them is that it is provided to everyone regardless of their status. Technology is the primary driver here and the only benefit is that computing is becoming more affordable. Much must be done to protect a nation the size of India fully. Some form of the party should carry out these regulations.
Educating the Public about Crypto
A technical regulation is currently in place; it can also be applied to crypto assets. In the early stages, India was a recipient of western protocol; however, it is now a protocol developer, as shown by UPI, open credit enables, and other success stories. This has now been implemented in various domains and is accessible to the general public and is available. India has created a multi-part protocol system and intelligent regulation. To be able to do it, we shall use our expertise. The first crypto employs ledger technology and is a multi-party protocol system and India needs its template; copying and pasting won’t work there. We must go forward with regulation, technology, and money.
More involvement is needed to integrate common sense policymaking with sane technology to produce something that makes sense in the Indian context.
Identifying the distinction between cryptocurrency and digital currency.
Policymakers must accept this new form of currency, and unique awareness efforts must be launched to educate investors on the legitimate and illegitimate uses of cryptocurrencies.
Regulate cryptocurrency in a way that will lessen the level of anxiety on the part of the citizens while allowing it to develop.
Discussions on how to govern cryptocurrency, if we have the capacity, and how it will be handled need to get deeper and deeper.
Moving toward a trusted and provenance-rich digital space
Dr. Amar Patnaik (MP, Rajya Sabha) feels that federalism is conceptually rooted in cooperation. The way the constitutional framers framed the constitution explains that it was not designed for competition.
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