Thu, 25 Nov 2021 03:55 PM IST
New Delhi | Jagran Business Desk: As the Central government announced that it is planning to introduce a bill in the winter session of the Parliament to ban private cryptocurrencies (with a few expectations) in India, tension sparked amongst the investors. Prices of all the cryptocurrencies crashed by 15 per cent on Wednesday as major cryptocurrencies including Bitcoin went down by around 17 per cent, Ethereum fell by 15 per cent, and Tether down by almost 18 per cent, as of 11:45 PM on November 23.
However, while the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 aims to regulate the circulation of private cryptocurrency in India, it also proposes to create a framework for the introduction of an official digital currency issued by the Reserve Bank of India (RBI).
“The Bill also seeks to prohibit all private cryptocurrencies in India, however, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses,” reads the bulletin on the Lok Sabha website.
Here's what the central bank digital currency (CBDC) is all about:
The Central Bank Digital Currency is the legal tender issued by a central bank in a digital form, according to the Reserve Bank of India. It is the same as a fiat currency, only its form is different. Also, CBDC is exchangeable one-to-one with the fiat currency.
What is private cryptocurrency?
Cryptocurrency basically means digital or virtual currency. One cannot see or touch it. However, it can be deposited in an online wallet, in the form of a digital coin. A private cryptocurrency is the one that is not regulated by government bodies. Therefore it is not duly recognized.
How is it different from cryptocurrency?
Explaining the difference between CBDC and cryptocurrency RBI in the statement said “CBDC is a digital or virtual currency but it is not comparable to the private virtual currencies that have mushroomed over the last decade. Private virtual currencies sit at substantial odds to the historical concept of money. They are not commodities or claims on commodities as they have no intrinsic value; some claims that they are akin to gold clearly seem opportunistic. Usually, certainly for the most popular ones now, they do not represent any person’s debt or liabilities. There is no ISSUER. They are not money (certainly not CURRENCY) as the word has come to be understood historically."
This means that the major difference between CBDC and cryptocurrency is that the former is backed by the bank while the latter is not. Unregulated currencies could be misused for various types of malpractices such as money laundering and terror financing.