However, historically the Reserve Bank of India (the RBI) and the Government of India have banned dealing in cryptocurrency. In India, cryptocurrencies are currently unregulated. Although there are not many countries which officially recognise the validity of cryptocurrencies (for instance, in Argentina and Canada, cryptocurrencies are considered to be money but not as an official legal tender), there are a few countries where trading of cryptocurrencies has been permitted and cryptocurrencies are accepted as a legal tender. There has been a mixed stance on the legality of cryptocurrencies in different jurisdictions. Given this, traders view cryptocurrency as a viable investment through which they may increase their money significantly. Interestingly, the price of bitcoin, which in 2010 was US$0.08 per bitcoin, is today approximately US$12,000 per bitcoin. The greater the demand, the higher the price and vice versa. The transactions involving trade of cryptocurrency works on the pure economic principle of supply and demand. Given the differences, regulating cryptocurrency requires a holistic perspective as compared to traditional forms of currency.ĭespite the above limitations, cryptocurrencies are widely traded internationally because of their potential high profits, leading to wealth generation for traders. Also, while traditional currencies can be stored virtually (in online accounts, wallets, etc), cryptocurrencies cannot be stored physically. No affiliated body issues cryptocurrency and it is not backed by any collateral such as bullion. Unlike traditional currencies, cryptocurrencies are not backed by any country or government and, therefore, not considered legal tender in many jurisdictions. Consequently, whenever any transaction/exchange of cryptocurrency is executed, the process gets lodged in the database (blockchain). The working and functioning of a cryptocurrency is based on the use of a complex digital algorithm known as ‘blockchain’, which is an online database of cryptocurrencies storing all the details, including the transactions executed. It is a cash system ‘based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for trusted third party’. It is essentially a digital representation of value that can be stored and transferred virtually. In plain English, cryptocurrency is a digital currency, which can be held by an individual in their digital wallet. In January 2009, the first block of the bitcoin was mined, popularly known as the ‘Genesis Block’. During that time, Satoshi Nakamoto, the father of the bitcoin, paved way for the first ever cryptocurrency using the blockchain technology. Juris history of cryptocurrency can be traced back to the 2008 Global Financial Crisis, when financial markets were in deep stress and people were losing faith in them. Back to Asia Pacific Regional Forum publications
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