Controlling the Crypto Genius – The Hindu

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Cryptocurrencies can only be controlled if all nations work together, which unfortunately is a remote possibility.

Elon Musk may be the real crypto player, as cryptocurrencies dance to his tunes. Crypto prices soared when Tesla announced it had invested $ 1.5 billion in Bitcoin and when Mr. Musk said Tesla would accept Bitcoin as a payment method for its electric cars. They collapsed when he reversed that decision and tweeted that Bitcoin prices looked high.

Nature of crypto-currencies

What is the true nature of these highly volatile cryptocurrencies? New York University professor Nouriel Roubini sees Bitcoin as a pseudo-asset that is pumped up by massive manipulation. Whether the crypto hype is a bubble is still a matter of speculation. While cryptoassets or cryptocurrencies are adopted by many, they are mainly under fire from authorities in many parts of the world, mainly because the transaction process using cryptocurrencies is so secure that only a transfer. money can be seen and nothing can be known about the sender and recipient. These decentralized assets, without any central bank controlling them, can therefore be used for hawala, which is a trust-based system for transferring money quickly in a parallel arrangement bypassing the traditional banking system and escaping the tax due. Anonymity and privacy are the underlying characteristics as well as the potential danger of cryptocurrencies. There have been accusations of money laundering using cryptocurrencies. The shadow of cryptocurrencies looms in the supply of money for terrorist activities. Cryptos have become the preferred payment system for hackers in ransomware attacks. And so, the attempt to put the genie back in the bottle was inevitable. But how is this possible and to what extent?

At one extreme, we have China which has almost banned cryptocurrencies and introduced its own centrally regulated digital currency called Digital Renminbi. At the other extreme, we have El Salvador which is the first country to use Bitcoin as legal tender. As many parts of the world plan to cut the wings of cryptocurrencies, El Salvador plans to build the world’s first Bitcoin city, initially funded by Bitcoin-backed bonds. The idea may be to mine the cryptocurrency to fuel investments in the country. The International Monetary Fund, however, recently said that Bitcoin should not be used as legal tender in El Salvador and urged the country to strengthen the regulation and oversight of its newly created payments ecosystem. The views of the United Kingdom, the United States and most countries in the European Union seem to fall in between. Many countries are trying to regulate it to some extent and also tax Bitcoin earnings in their own way.

Under the scanner

In India, cryptocurrencies had been under the scanner for quite some time. In 2018, the then Minister of Finance said: The government does not recognize cryptocurrency as money or legal tender and will take all measures to eliminate the use of these crypto-assets in funding illegitimate activities. or as part of the payment system. A high-level government committee has recommended a ban on all cryptocurrencies except those issued by the state. Then, in 2020, the Supreme Court revoked the restriction on cryptocurrency trading imposed by the Reserve Bank of India (RBI).

The Cryptocurrency and Official Digital Currency Regulation Bill of 2021 is listed for introduction this session of Parliament. It seeks to ban all private cryptocurrencies in India but allows certain exceptions to promote the underlying technology and its uses. It also aims to create a framework to facilitate the creation of the official digital currency that will be issued by the RBI. Of course, a central bank’s digital currency may not look like a true substitute for decentralized cryptocurrency to many users. A few weeks ago, there was speculation about the imposition of strict regulations and the taxation of crypto income in India. There was also speculation about a blanket ban, which caused the prices of major cryptocurrencies to drop. It is not known what kind of regulation will ultimately be imposed.

A regulated market will certainly keep illegal activities under control to some extent. Most common investors will follow the rules and substantial money will be made from taxes. But is it possible to completely stop the funding of hawala, drugs or terrorism by crypto with such regulations? Recently Prime Minister Narendra Modi said that cryptocurrencies must not fall into the wrong hands and spoil our youth and urged all democratic nations to come together and ensure that such things do not happen. Of course, unless all nations are working together, genius cannot be completely controlled. And, unfortunately, that is a remote possibility. At the moment, countries impose their own regulations. And Mr. Musks’ tweets could continue to regulate the crypto dance.

Atanu Biswas is Professor of Statistics, Indian Statistical Institute, Kolkata

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