The way forward for Crypto Currencies

1. Cryptocurrency a boon to digital transactions & financial inclusion
R. Kannan
Cryptocurrency and its rapid valuation strides have made headlines globally. Forcing
governments and regulators to take note of digital currency as an emerging asset
class luring the average investor. Cryptocurrency is a digital asset created to be
used as a medium of exchange -- like cash.
Bitcoin, the most popular cryptocurrency has send ripples across global markets as it
crossed the landmark $ 10,000 threshold.
While most governments and regulators have cautioned investors against investing
in Bitcoin and other cryptocurrencies, they continue to evaluate introducing their own
digital currency. A group of experts at the Reserve Bank of India are examining the
possibility of a fiat cryptocurrency which could be used as a digital currency.
According to a few media reports the RBI’s digital currency is rumored to be
called Lakshmi.
Regulators across the globe including United States, Singapore, Japan and China
are looking at regulatory measures to rein in the growth in cryptocurrency or digital
currency. In China cryptocurrency exchanges are shifting and improvising their
business for domestic cryptocurrency traders.
China allows private individuals to hold and trade bitcoin, but prohibits participation
by banks and other financial institutions. Some countries explicitly permit the use of
bitcoin which includes Canada and Australia. The US has adopted a positive stance
in regards to Bitcoin. Meanwhile, it also has ordered several government bodies to
assure that transactions in Bitcoin are carried out only in legal terms. In April,
markets cheered Japan for recognizing bitcoins as legal tender and license 11
exchanges.
India is on the brink of a digital revolution after the revolutionary reform
–Demonitisation. Digital transactions in the country has seen an 80% jump during
2017-18, with the total amount expected to touch Rs 1,800 crore. The value of digital
transactions till October this year stood at Rs 1,000 crore, which was nearly equal to
that for the whole of 2016-17, according to the ministry of information technology.
If the numbers are anything to go by there could be merit for the Indian government
to weigh the pros and cons of floating its own digital currency to further boost digital
transactions. Cryptocurrency or digital currency can revolutionize digital payments in
India. Transactions through digital currency are cost effective, fast and transparent.

2. Since, the transactions is traceable due to a public ledger it ensures transparency.
Blockchain technology ensures the transactions are secure and hence the chances
of frauds are minimal. Hassel free instant settlement of transactions in the age of
smart phone penetration and internet connectivity has led to the increased
acceptability and popularity of digital currency.
Digital currency with the right regulatory environment could also help promote
financial inclusion. It’s easier for individuals to open an e-wallet account than a
traditional bank account given the increased mobile and data penetration.
The usage of Aadhar in the country has made it easy for individuals to execute
digital transactions and open e- accounts instantly.
With the operationalization of payment and small banks the introduction of digital
currency could change the way India banks or avails off and conducts financial
services.
 Regulators and governments globally are concerned that in the present form the
digital currency is being used for money laundering and tax evasion. The concerns
are valid considering this technology is new and its acceptance is increasing among
the average investors.
Considering the many advantages of this technology, Governments can no longer
ignore its existence and there’s a need to frame a regulatory mechanism to
monitor its usage. It’s not just individuals; corporates have also started using this
technology for intra company transactions to reduce the cost of operations.
Regulators and government in India need to collaborate and evaluate if this
emerging asset class can be regulated by the current regulations of Know Your
Customer, money laundering, foreign exchange and GST norms.
Author is Head Corporate Performance Monitoring & Research, Hinduja Group
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15th
December 2017