Mains Paper 2: Governance | Government policies and interventions for development in various sectors and issues arising out of their design and implementation.
From UPSC perspective, the following things are important:
Prelims level: B2B
Mains level: The newscard briefly discusses the concerns of the Indian Government, related to the cryptocurrencies. It also talks about positive side of this technology.
- The Finance Ministry’s warning to potential investors in bitcoin and other cryptocurrencies
Why has the bitcoin became popular?
- The price of bitcoin, the most popular of all cryptocurrencies, not only shot up by well over 1000% over the course of the last year
- But the price also fluctuated wildly
- One of the main reasons for this volatility is speculation and the entry into the market of a large number of people lured by the prospect of quick and easy profit
Why is government so serious?
- Most new users(of the technology) know close to nothing of the technology, or how to verify the genuineness of a particular cryptocurrency
- A number of investors, daunted by the high price of bitcoin, have put their money into less well-established and often spurious cryptocurrencies, only to lose it all
- Even some private cryptocurrency operators in India have gone on record saying that as many as 90% of the currencies are scams
- The use value of cryptocurrencies, both as a medium of exchange and as a store of value, is still being explored
View of other countries on this
- Countries like South Korea and the U.S. are intensifying regulatory scrutiny of the market
- South Korea, where bitcoin became something of a craze, recently proposed legislation to either heavily regulate exchanges or ban them
- Recently in the U.S., a court ordered a popular cryptocurrency platform to hand over information related to 14,000 accounts to the Internal Revenue Service, undermining the anonymity the digital currencies offer
India should be cautious
- India must be careful to differentiate between cryptocurrencies and the blockchain technology they are based on
- Cryptocurrencies may or may not emerge as a useful tool, especially since the government may not want to encourage the proliferation of anonymous, non-fiat currencies as its anti-black money fight intensifies
Positive side of the technology
- But blockchains, basically digital ledgers of financial transactions that are immutable and instantly updated across the world, are worth looking at as aids to ease doing business
- They have the potential to greatly streamline payment mechanisms and make them transparent
- Also, the Chairman of the Securities and Exchange Board of India, said, blockchain technology is useful and should not as yet have regulatory oversight