Why is it in the news?
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A committee set up by the government on virtual currencies has proposed banning of private cryptocurrencies in India.
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The committee set up to look into the legality of cryptocurrencies and blockchain has also proposed a draft bill “Banning of Cryptocurrency & Regulation of Official Digital Currency Bill, 2019″.
More in the news
Outcomes of the committee:
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The draft Bill mandates a fine and imprisonment of up to 10 years for offences.
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However, the government should keep an open mind on the potential issuance of cryptocurrencies by the Reserve Bank of India.
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Cryptocurrencies do not have any intrinsic value of their own and lack any of the attributes of a currency.
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That is, they neither act as a store of value nor are they a medium of exchange in themselves.
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The private cryptocurrencies are inconsistent with the essential functions of money/currency, hence private cryptocurrencies cannot replace fiat currencies.
Distributed ledger technology (DLT):
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The committee has highlighted the benefits of the underlying technology- the distributed ledger technology (DLT) and blockchain.
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The Committee recommends that the RBI examine the utility of using DLT based systems for enabling faster and more secure payment infrastructure.
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The committee identifies the potential use cases for blockchain technology in areas such as payments systems including:
1. Cross-border and small value payments.
2. Data identity management or know-your-customer requirements by various financial entities.
3. Insurance.
4. Collateral and ownership (including land) registries.
5. Loan issuance and tracking.
Source
The Hindu.