WHAT IS CRYPTOCURRENCY?
Cryptocurrencies are a kind of virtual system which enables their holders to use that for digital payments. One major advantage of cryptocurrency is that distance is not a barrier and it allows individuals to send money from any part of the world to any other. An individual is not required to present there in person and the entire transaction can take place online. The term “cryptocurrency” stems from the fact that transactions are verified through encryption. Since cryptocurrency works on a high level of coding then storing it is a task and also a high level of coding is required but all this is worth it as all this encryption and high level of coding ensures the safety and security of the cryptocurrency and protects it from potential attacks.
In 2009 first cryptocurrency was made although its developer is still unknown and there are various theories regarding the origin of Bitcoin, the first cryptocurrency The temptation to trade for profit is at the root of much of the excitement with cryptocurrencies, with speculators driving prices up at times.
HOW DOES CRYPTOCURRENCY WORKS?
They can be termed as blockchain technology, a blockchain that stores all the data in a virtual format “Mining, which requires using computer processing power to solve complex mathematical problems” in order to earn coins, is how cryptocurrency units are created. If you are interested in buying cryptocurrencies then there are a lot of ways to proceed for the same one is going through a broker or using various kinds of apps available these days.
If you own cryptocurrency, you don’t own anything tangible. You have a key that allows you to move a record or a unit of measurement from one person to another without the use of a trusted third party.
IS CRYPTOCURRENCY SAFE?
Blockchain technology is commonly used to create cryptocurrencies. This method followed to create cryptocurrencies is a long and complex process but it also ensures full safety and a secure environment is created for the same.
STATUS OF CRYPTOCURRENCY IN INDIA
Currently, there is no rule in place in the country regarding the usage of cryptocurrencies and the citizens of India are free to trade in cryptocurrency. The Supreme Court of India also passed a judgment and overturned the Reserve Bank of India’s (RBI) rule prohibiting banks from enabling crypto transactions in March 2020. The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, is set to be introduced in Parliament during the Winter The session, and it aims to outlaw all “private cryptocurrencies”. But still, there are some speculations about that bill and how will the global market react to that bill.
CHALLENGES OF CRYPTOCURRENCY
Security risks: If hackers and bad individuals get access to virtual currency, they can create as cryptocurrency as much as they wish as once the system gets hacked, they know how to make virtual cryptocurrencies hence they can manufacture false virtual currency or steal virtual currency. There are many games that allow the sale and purchase of items in cryptocurrency therefore, a lot of users visit that site to buy those virtual currencies.1 They require certain components. Many WoW gold-selling websites are untrustworthy and susceptible to hacking. Many users have expressed their dissatisfaction with paying real money for nothing or for phony virtual currency.
Concerns about cryptocurrency systems collapsing: Because virtual currency is not issued based on demand and supply, it will cause economic problems in a number of virtual communities. Cryptocurrencies also face some threats from Inflation and economic problems that can cause them to collapse.
Impact on real-world monetary systems: Because some virtual currency systems are linked to real-world monetary systems, they may have an impact on real-world money demand and supply. Allowing consumers to buy virtual and real products and services using virtual currency on some platforms, for example, may lower the demand for actual money. Users will no longer use real money to purchase items; instead, they will use virtual money. Since there will be sites that will allow users to buy things in cryptocurrencies therefore the use of real money will be severely affected and will also cause fluctuations in its prices.
Money laundering is a concern that is very likely to increase as a result of the use of VC, particularly with platforms that allow users to swap virtual currency for real money. Ill effects of cryptocurrency are already seen in Korea where around 38 million dollars were illegally acquired by the gang of 14 people.
Unknown identity risks: Because most virtual currency platforms, such as social games and social networks, do not require authentication, financial transactions are difficult to track. There is no way to identify the source of the virtual currency that is created or cashed out.” This makes it impossible to track transactions if money laundering is suspected. Furthermore, offenders will be able to receive rewards in virtual currency for their crimes if they have an anonymous identity.
It can be easily concluded that though Cryptocurrencies provide an efficient payment option it also has some drawbacks and governments of counties all over the world need to work on them to bridge those gaps. It also offers an alternative payment mechanism, in addition to real money, that allows users to conduct financial transactions like buying, selling, transferring, and exchanging with ease.2 Cryptocurrency platforms, despite opening several channels for digital financial transactions and providing a new form of currency with many procedures and methods, are not properly monitored and regulated. There have been various studies on the fields of cryptocurrency and those studies have highlighted a lot of issues being faced by the industry. Lack of legislation regarding it being the major issue.
- What is a cryptocurrency and how it works? https://www.kaspersky.com/resource-center/definitions/what-is-cryptocurrency#:~:text=Cryptocurrency%20is%20a%20digital%20payment,to%20send%20and%20receive%20payments.&text=When%20you%20transfer%20cryptocurrency%20funds,is%20stored%20in%20digital%20wallets.
- Jani, S. (2018). The Growth of Cryptocurrency in India: Its Challenges & Potential Impacts on Legislation. Research gate publication.
This article is written by Dalima Pushkarna student at Dr. Ram Manohar Lohiya National Law University, Lucknow.