Why is it in news?

The Finance Minister’s statement in his Budget speech on crypto currencies does not mean that it is illegal to hold these currencies, but only means it is illegal to transact using them in place of legal tender, according to industry players and analysts.

Details

• The Government does not consider crypto currencies legal tender or coin and will take all measures to eliminate use of these crypto assets in financing illegitimate activities or as part of the payment system.
• The Government will explore use of block chain technology pro-actively for ushering in digital economy.
• The Finance Minister in his budget speech has reiterated the stand by the Reserve Bank of India that crypto currency is not recognised as a legal tender in India, but it still does not hints at bitcoins at being termed as illegal.
• Legal tender is only coins and currency as defined by the RBI. So, gold, stocks, bonds are not legal tender. But the fact that they are not legal tender makes no comment on whether they themselves are legal or illegal.
• With no regulations governing virtual currencies in India and despite no licences granted to any entity to prevent them from operating in such currencies, there is a heightened risk of investment bubble which may have resulted in sudden and prolonged crash exposing investors.

About Cryptocurrency

• A cryptocurrency (or crypto currency) is a digital asset designed to work as a medium of exchange that uses cryptography to secure its transactions, to control the creation of additional units, and to verify the transfer of assets.
• Cryptocurrencies are classified as a subset of digital currencies and are also classified as a subset of alternative currencies and virtual currencies.
• Cryptocurrencies use decentralized control as opposed to centralized electronic money and central banking systems.  The decentralized control of each cryptocurrency works through a blockchain, which is a public transaction database, functioning as a distributed ledger.
• Bitcoin, created in 2009, was the first decentralized cryptocurrency.^[7] Since then, numerous other cryptocurrencies have been created. These are frequently called altcoins, as a blend of alternative coin.

Source

The Hindu