Government mulling India’s own cryptocurrency

TOPIC GS PAPER III ECONOMY

Inclusive growth and issues arising from it.

The Central government is considering a proposal to introduce its cryptocurrency similar to Bitcoin. The proposal was discussed by a committee of government officials, and the panel found the idea of setting up and running blockchain for financial services useful.

Whenever the decision is taken, the cryptocurrency will fall in the domain of the Reserve Bank of India (RBI) and some Acts such as the Currency Act might have to be amended. Hence, this will be a time-consuming process.

The government might name its cryptocurrency “Lakshmi”. 

REASON

• Banks are trying blockchain as a technology and to make blockchain work it would need some Since it doesn’t trust Bitcoin it may come up with their own currency.”
• Running a ledger-like blockchain cryptocurrency is required for settlement and the RBI and government officials have said that they are not comfortable with Bitcoin.
• China, Russia, and Estonia are said to be considering having their own cryptocurrencies.
• A few days ago RBI Executive Director Sudarshan Sen had talked about the central bank’s discomfort with Bitcoin, which has recently come under intense global regulatory scrutiny.

WHAT IS A CRYPTOCURRENCY?

Cryptocurrency is a form of digital money that is designed to be secure and, in many cases, anonymous. It is a currency associated with the internet that uses cryptography, the process of converting legible information into an almost uncrackable code, to track purchases and transfers.

Cryptography was born out of the need for secure communication in the Second World War. It has evolved in the digital era with elements of mathematical theory and computer science to become a way to secure communications, information and money online.

How do cryptocurrencies work? 

Cryptocurrencies use decentralised technology to let users make secure payments and store money without the need to use their name or go through a bank. They run on a distributed public ledger called blockchain, which is a record of all transactions updated and held by currency hold.

What is it?

A digital currency, used to make payments of any value without fees. It runs on the blockchain, a decentralised ledger kept running by “miners” whose powerful computers crunch transactions and are rewarded in bitcoins

Who invented it?

Satoshi Nakamoto, a secretive internet user, invented bitcoin in 2008 before it went online in 2009. Many attempts to identify Satoshi have been made without conclusive proof

What’s it for?

People see value in money free from government control and the fees banks charge; as well as the blockchain, to verify transactions. Bitcoin has been seen as a tool for private, anonymous transactions, and it’s the payment of choice for drug deals and other illegal purchases

Is it worth anything?

Yes. As of July 2017, there were around 16.5m bitcoins in circulation. In March 2017, the value of a Bitcoin, at $1,268, exceeded that of an ounce of gold ($1,233) for the first time.

What is Bitcoin Cash?

In August 2017, the blockchain forked to support another cryptocurrency, Bitcoin Cash, which is optimised slightly differently. People who held Bitcoin received an equal value of Bitcoin Cash following this ‘hard fork’.

QUESTION ARISING FROM THE NEWS

WHAT DO YOU UNDERSTAND BY THE TERM CRYPTOCURRENCY? WHAT IS THE RATIONALE BEHIND GOVERNMENT’S RECENT PROPOSAL OF LAUNCHING ITS OWN CYRPTOCURRENCY?

REFERENCE

BUSINESS STANDARD, THE TELEGRAPH, 21 Nov