The Bold Voice of J&K

Need to ban crypto currency


Dr Daleep Pandita

A new virtual form of financial transaction, commonly known as crypto currency came in to international existence in the year 2009. It is executed through more than 5000 meme coins with commonly using Bitcoins and Dogecoins. Not having any physical form, crypto currency is basically devoid of intrinsic value neither having any legal entity nor is redeemable for some amount of another commodity. Without any control by the financial regulator, the circulatory system of meme coins is privately individualistic transacted without involvement of a third party, as is evident even by its name – cryptography. With a hefty strength of more than $ 2 trillion, crypto market has not seen any kind of consistent volatility so far that is otherwise frequently witnessed in equity markets, because of which this bull market has earned sufficient trust and confidence of investors without the fear of losing money on this platform. Currently this virtual currency has evolved as a critical part of international economy by becoming secure and comfortable means of financial system across the globe and so has emerged as a dependable diversification tool of investment portfolio also. This concept of crypto currency in India was conceived after the demonetization era, which shook financial confidence of the people on flat currency. But actually it gained momentum during COVID pandemic period in which digital mode of payments became regular method of financial transactions in our country. As on date, crypto currency is not considered to be a legal tender like that of flat money issued by Government of India. Now presently it needs financial authorization and legality in our country for which lot of lobbying is going on around business giants. Despite the undue pressure created by unwanted lobby of more than 80 lakh less exposed Crypto investors, pressurizing our political system under the false ambit of much needed rapid economic development for its legalisation, these unauthorized financial transactions are still continuing unabated. This unlawful mode of financial transactions has also spread its tentacles in the Union territory of Jammu and Kashmir particularly with investors having overseas connections and indulging in banking across the globe.
Actually, it has been always the demand of our financial system to critically analyse the pros and cons of this form of economy before legitimizing and introducing it in our system. Based on comprehensive study conducted by a designated committee constituted by the Reserve Bank of India ( RBI ) for this purpose, has very recently made strong recommendations to the Union Finance Ministry for immediately banning the crypto currency in India. Even for second time ‘Crypto currency and Regulation of Official Digital Currency Bill-2021’ was deferred by the Parliament , that under the pressure of its hidden investors, at least proposing to levy taxation on such transactions thereby indirectly legitimizing the introduction of this type of virtual form of currency in our country. Financial instability, Hidden unaccountable transactions, Lack of control by the regulators, unfair utilization of funds including their misappropriation, increase in economic crimes, promoting financial frauds, enhancing cyber crimes, evading taxations, violating foreign exchange principles, causing money laundering and importantly abetting terrorism activities due to cross-border financial transactions are some of the important threats which makes crypto currency transactions highly risky and dangerous for our country. So, crypto currency is not risky preposition for investors but it is equally unsafe and highly volatile for our overall financial system and not recommended in the interests of national safety and security for a country like India. Realising such drastic consequences, even countries like China, Turkey, Gulf nations and some of the European countries have already banned the circulation of crypto currency in their economy. RBI in 2018 directed our banking and non banking financial institutions not to allow any kind of transaction involving crypto currency, the much needed move that drove many crypto exchanges out of business in India. Now again on the basis of their detailed study, it has reaffirmed its earlier commitment of recommending immediate ban on the introduction of crypto currency in Indian financial system. Instead lessons need to be drawn from the experiences of those countries that have already banned the usage of crypto currency in their economic system. It can be of immense assistance in legislating with adequate teeth, the curbing of this menace posing serious internal and external threats to our economy and to our national development, thereby sending a strong message to the unauthorised lobby of hidden crypto investors promoting risky and dangerous crypto currency transactions in India.

(The author is a former senior executive with Government of India, Non banking financial PSU & visiting faculty for SKPA.).

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