Crypto battle refer to the ongoing conflict between government and decentralized finance (DeFi ) industry over regulation and control of crypto currency and encryption technologies.
This conflict often called the “ crypto war “ because government attempting to limit public access to strong encryption that could thwart decryption by intelligence agencies like the NSA .
Why is government having so much concern any why is it threat for national security because of which this battle is going on ?
The transition is completely anonymous I.e, there is no trace of source and Destination which may lead to numerous suspicious activity all around like tax evasion, terror funding , control of currency and least it can use in war for funding .
Reason :-
MARKET VOLATILITY :-
Price can fluctuate dramatically , impact investor and traders which lead to loss of currency as well job in the country.
TAXATION :-
Crypto currency present challenges for taxation, as transection can be difficult to track and value accurately that’s why government are concern about potential tax evasion and loss of revenue.
SOVEREIGNTY :-
The rise of crypto currency and their potential to become widely accepted as an alternative to national currencies can challenge a government sovereignty over it’s own currency and financial system.
MARKET DYNAMIC :-
The sudden rise and fall in the crypto currencies can shift market dynamic i.e, share market of the country.
SECURITY :-
Crypto space is frequently targeted by hackers , leading to theft and security breaches . This incident can undermine trust in the technology and result in financial losses .
ENVIRONMENTAL CONCERN :-
Crypto mining required high powerful network, internet access , computer and electricity which generate huge e-waste in nature which going affect nature as well as human health .
THERE ARE ADVANTAGES ALSO :-
DECENTRALIZED:-
The competition promotes the creation of decentralized system , reducing the reliance on centralized entity like bank and financial institution
REDUCED COST :-
It Can reduce transaction cost by eliminating intermediary and streamline process . This is specially beneficial cross border transaction and remittance.
GLOBAL ACCESS :-
Crypto currency and block chain technologies offer global access to financial services , enabling seamless cross border transaction and reducing barrier for international trade and commerce.
NEW BUSINESS MODEL :-
Creation of new business model and revenue streams such as decentralized finance, non fungible token and smart contract , which can revolutionize various industries.
FINANCIAL INCLUSION :-
Provide financial services to unbanked and under banked population , offering access to banking, leading and investment opportunities .
COLLABORATION AND INTERVENTION ENGAGEMENT:-
The Indian government has taken several initiatives to address the challenges and opportunities presented by cryptocurrencies.
- REGULATION FRAMEWORK :–
Cryptocurrency and Regulation of Official Digital Currency Bill The Indian government has been working on drafting legislation to regulate cryptocurrencies and potentially create a framework for an official digital currency issued by the Reserve Bank of India (RBI). The bill aims to ban private cryptocurrencies while promoting the development of underlying block chain technology.
- RBI Stance
Ban and Supreme Court Ruling : In 2018, the RBI issued a circular banning banks and financial institutions from dealing with or providing services related to cryptocurrencies. However, in March 2020, the Supreme Court of India overturned this ban, allowing banks to resume services for cryptocurrency businesses.
- Central Bank Digital Currency (CBDC)
Digital Rupee : The RBI has announced plans to explore the feasibility of a Central Bank Digital Currency (CBDC) and has started pilot projects for the digital rupee. This initiative aims to create a secure and efficient digital version of the Indian rupee.
- Taxation Policies
Tax Clarifications : The Indian government has clarified that income from cryptocurrency transactions is subject to taxation. In the Union Budget 2022, the government introduced a 30% tax on income from the transfer of virtual digital assets, including cryptocurrencies, with no deductions allowed except for the cost of acquisition.
5. Consumer Protection and Education :
Public Awareness Campaigns: The government and regulatory bodies, including the Securities and Exchange Board of India (SEBI) and the RBI, have issued public warnings about the risks associated with cryptocurrency investments, emphasizing the volatility and potential for fraud.
6 Anti-Money Laundering (AML) and Know Your Customer (KYC) Requirements :
Compliance Requirements: Cryptocurrency exchanges in India are required to comply with AML and KYC regulations to prevent money laundering and other illicit activities. Exchanges must verify the identities of their users and report suspicious transactions to the relevant authorities.
7 Regulatory Sandbox :
Innovative Financial Products: The RBI has established a regulatory sandbox to encourage innovation in the financial sector, including the development of blockchain technology and digital currencies. This allows fintech companies to test their products in a controlled environment under regulatory supervision.
8 Collaborations and International Engagement :
Global Forums: India actively participates in international forums such as the Financial Action Task Force (FATF) and G20 to collaborate on global standards and regulatory approaches for cryptocurrencies .
These initiatives reflect India’s cautious approach towards cryptocurrencies, aiming to harness the benefits of blockchain technology while mitigating the associated risks. The government continues to evaluate and adapt its policies in response to the evolving landscape of digital currencies.
