A cryptocurrency is a digital asset designed to work as a medium of exchange wherein individual coin-ownership records are stored in a digital ledger or computerized database, using strong cryptography to secure transaction-record entries, to control the creation of additional digital coin records, and to verify the transfer of coin-ownership.
It typically does not exist in physical form (unlike paper-money!), and is typically not issued by any central authority. Cryptocurrency is a new form of digital asset based on a network that is distributed across a large number of computers.
This decentralized structure allows them to exist outside the control of governments and central authorities.
The word, “cryptocurrency” is derived from the encryption-techniques which are used to secure the network.
Block-chains, which are organizational methods for ensuring the integrity of transactional data, are an essential component of many cryptocurrencies. Many experts believe that blockchain and related technology will disrupt many industries, including finance and law.
In the Act, (Banning of Cryptocurrency & Regulation of Official Digital Currency Bill, 2019) cryptocurrency, by whatever name called, means any information or code or number or token, not being part of any Official Digital Currency, generated through cryptographic means or otherwise, providing a digital representation of value which is exchanged with or without consideration, with the promise or representation of having inherent value in any business activity which may involve risk of loss or an expectation of profits or income, or functions as a store of value or a unit of account, and includes its use in any financial transaction or investment, but not limited to- investment schemes.
Activities prohibited under this Act:
(a) No person shall mine, generate, hold, sell, deal in, issue, transfer, dispose of, or use cryptocurrency in the territory of India
(b) Nothing in this Act shall apply to any person using technology or processes underlying cryptocurrency for the purpose of experiment or research, including imparting of instructions to pupils, provided that no cryptocurrency shall be used for making or receiving payment in such activity
(c) Nothing in this Act shall apply to the use of Distributed Ledger Technology for creating a network for delivery of any financial or other services or for creating value, without involving any use of cryptocurrency, in any form whatsoever, for making or receiving payment.
Maximum amount of fine for committing offence in this regard:
For the purposes of Sections 8 and 9 (offences), the maximum amount of fine that may be imposed upon a person for an offence shall be as follows-
(a) The higher of
i) three times the loss or harm caused by the person; or
ii) three times the gain made by the person
(b) If the loss caused or the gain made by the person cannot be reasonably determined, the maximum amount of fine that may be imposed on such persons shall be as specified in the First Schedule as against each of the offences under Sections 8 and 9.
Cryptocurrency faces criticism for a number of reasons.
Since market-prices for cryptocurrencies are based on supply and demand, the rate at which a cryptocurrency can be exchanged for another currency can fluctuate widely, since the design of many cryptocurrencies ensure a high degree of scarcity.
Bitcoin has experienced some rapid surges and collapses in value, climbing as high as $19,000 per bitcoin in December of 2017, before dropping to around $7,000 in the following months.
Cryptocurrencies are, thus, considered by some economists to be a short-lived fad or speculative bubble. There is concern that cryptocurrencies like bitcoin are not rooted in any material good.
Some research, however, has identified that the cost of producing a bitcoin, which requires an increasingly large amount of energy, is directly related to its market-price.
Cryptocurrency-blockchains are highly secure, but other aspects of a cryptocurrency-ecosystem, including exchanges and wallets, are not immune to the threat of hacking.
In bitcoin's 10-year long history, several online exchanges have been the subject of hacking and theft, sometimes with millions of dollars worth of "coins" stolen.
Cryptocurrencies face criticism for a number of reasons, including their use for illegal activities, Exchange Rate Volatility, and vulnerabilities of the infrastructure underlying them.
However, these have also been praised for their portability, divisibility, inflation-resistance, and transparency.
By Rohan Gandhi (MMM Shankarrao Chavan Law College, Pune)
