Focus: GS-III Science and Technology, Prelims
Why in news?
- The Supreme Court on March 4 set aside an April 6, 2018, circular of the Reserve Bank of India (RBI) prohibiting banks and entities regulated by it from providing services in relation to virtual currencies (VCs).
- The position as on date is that VCs are not banned, but the trading in VCs and the functioning of VC exchanges are sent to comatose by the April 6 circular.
Why did the SC Lift the ban?
- RBI had Not come out with a stand that any of the entities regulated by it namely, nationalised banks/scheduled commercial banks/cooperative banks/NBFCs, have suffered any loss or adverse effect directly or indirectly, on account of VC exchanges
- The RBI did not consider the availability of alternatives before issuing the circular (April 6, 2018 circular) banning the Virtual Currencies (VC).
- The Centre’s failure to introduce an official digital Rupee despite two draft bills and several committees.
What is Cryptocurrency?
- Cryptocurrency is an internet-based medium of exchange which uses cryptographical functions to conduct financial transactions. Cryptocurrencies leverage blockchain technology to gain decentralization, transparency, and immutability.
- The most important feature of a cryptocurrency is that it is not controlled by any central authority: the decentralized nature of the blockchain makes cryptocurrencies theoretically immune to the old ways of government control and interference.
- Cryptocurrencies can be sent directly between two parties via the use of private and public keys. These transfers can be done with minimal processing fees, allowing users to avoid the steep fees charged by traditional financial institutions.
- Few Notable Cryptocurrencies
- Bitcoin – First and the most famous cryptocurrency