Regulating cryptocurrency:


Why in the news?

Prime Minister Narendra Modi chaired a meeting on cryptocurrency at the Reserve Bank of India (RBI), Citing the unregulated nature of the crypto market, he called for taking progressive and forward-looking steps.

  • China has declared all cryptocurrency transactions illegal, effectively imposing a complete ban.
  • El Salvador has permitted Bitcoin as a legal tender.

Key highlights:

  • The Union government has not yet enacted any law on cryptocurrencies. 
  •  After several rounds of discussion, the government largely wants to set limits on cryptocurrencies trading in India.

What is cryptocurrency?

  • A cryptocurrency is a virtual currency used for financial transactions. It uses blockchain technology for various transactions. Earlier, the RBI has issued a circular prohibiting use of these virtual currencies.
  • Cryptocurrencies typically use decentralized control as opposed to centralized digital currency and central banking systems.
  • Bitcoin is the first decentralized cryptocurrency.

Various concerns related to cryptocurrencies:

Privacy Concerns:

  •  The privacy of users’ data is at stake. There is concern regarding privacy of users .Thus Hackers can easily observe how the money flows.

Cybersecurity Concerns:

  •  Cryptocurrencies are prone to cybersecurity breaches and hacks. Various attacks are common, even companies and governments are not full proof of them.

Dark activities:

  •  The possibility that the new money will nurture illicit activities and markets like drug selling, weapons etc. through Darknet is always high using cryptocurrency anonymously.

Sovereign guarantee:

  •  Cryptocurrencies pose risks to consumers. They do not have any sovereign guarantee and hence are not legal tender.


  • Bitcoin is a type of digital currency that enables instant payments to anyone.
  •  Bitcoin was introduced in 2009. 
  • Bitcoin is based on an open-source protocol and is not issued by any central authority.
  •  Bitcoin is a peer-to-peer currency. Peer-to-peer means that no central authority issues new money or tracks transactions.
  • The Bitcoin software is completely open-source and anybody can review the code.

How does Bitcoin work?

  • Bitcoins are generated all over the Internet by anybody running a free application called a Bitcoin miner. 
  • When you transfer Bitcoins, an electronic signature is added.
  • After a few minutes, the transaction is verified by a miner and permanently and anonymously stored in the network.

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