This article is written by Dhwisha Bhatt of Symbiosis Law school, Hyderabad
WHAT IS CRYPTOCURRENCY?
Cryptocurrency is a form of payment that can be interchanged for items & services online. Cryptocurrencies operate on blockchain technology. Blockchain is a decentralized technique that appears to be able to document transactions across many computers. The security of this technology is part of its allure. A cryptocurrency is a digital or virtual currency that is cryptographically guarded and cryptocurrencies are deployed networks built on blockchain technology, which is a blockchain platform enforced by a network of computers. Cryptocurrencies are highlighted by the fact that they are not typically approved by a centralized power, making them vulnerable to prospective state intervention or modification.
DISADVANTAGES OF CRYPTOCURRENCY
Bitcoin (BTCUSD) has sparked debate and news since its debut in a 2008 whitepaper. Its supporters hail the cryptocurrency's launch as the beginning of a new and equitable monetary system. Critics argue that the cryptocurrency's involvement in criminal activities, as well as its lack of legal recognition, demonstrate that it is “rat poison squared”. The truth is most likely somewhere in the middle. Meanwhile, governments all over the world are keeping a wary eye on Bitcoin's progress. Some countries, such as El Salvador, have adopted it as currency. However, rich nations, including the US, China refuse to accept it as legal tender. They have valid reasons to do so.
Bitcoin, among some other things, allows people of a country to subvert government power by circumventing currency controls imposed by the government. It also enables criminal activity by assisting lawbreakers in secret communications. Finally, by eliminating intermediaries, Bitcoin has the potential to disrupt and destabilise the existing financial infrastructure system. Governments around the world are watching Bitcoin's progress with bated breath because it has the ability to disrupt the existing financial system and undermine their role in it.
Bitcoin, in its current form, poses multiple problems to government authority: it cannot be regulated, it is used by criminals, and it can assist citizens in circumventing censorship. The major disadvantage of using cryptocurrency is that that the transactions are completely out of control of the government which makes it very difficult to track different financial crimes taking place through cryptocurrencies.
REASONS FOR BANNING CRPTOCURRENICES IN CHINA
In September, People's bank of China asserted that all cryptocurrency transactions were ethically wrong, effectively forbidding digital tokens such as Bitcoin. The Bank of China warned that "digital money system business operations are fraudulent economic activities," trying to add that they "gravely jeopardise the security of people's investments." China has one of the world's biggest crypto-currency markets. Variations there have a huge impact on the overall price of crypto-currencies. The region has long been opposed to cryptocurrencies. In 2013, when the price of the digital coin skyrocketed from $100 to $1,000 in a matter of months, People's Bank of China prohibited financial institutions from trading it. It also forbade soliciting donations through cryptocurrency and closed down national bitcoin exchanges in 2017. Nevertheless, in recent weeks, the government has strengthened its anti-cryptocurrency crackdown, angling to effectively ban even cryptocurrency extraction and buying and selling.
Chinese Vice Premier Liu He and the State Council gave a notice in May, declaring that it was requisite to "crackdown on Bitcoin commodities trading behaviour and attitude, and determinedly inhibit the trans-border use of Bitcoin." Bitcoin's price dropped by more than $2,000 (£1,460) following the Chinese official statement. It is the most recent version in the current national crackdown about what it sees as a turbulent, speculative bubble at best - and a means of tax evasion at worst. Since 2019, cryptocurrency trading has been officially forbidden in China, but it has proceeded online via forex markets. However, there has been a significant restriction this year. In May, Chinese state institutions warned buyers that if they continued to trade Bitcoin and other currencies online, they would have no recourse, as government officials vowed to put more pressure on the industry. In June, it informed banks and payment platforms that they would no longer be able to facilitate transactions, and it prohibited "mining" the currencies, which is the practise of using powerful computers to generate new coins. However, one government employee stated that while investing in cryptocurrencies would be illegal, retaining cryptocurrencies would not be considered illegal. According to reports, the country also considers crypto-currencies to be environmentally harmful because "mining" something like Bitcoin requires a huge amount of computing power, which tends to increase energy usage. According to reports, the energy consumption of computers and server farms used to mine Bitcoin exceeds that of a country like Switzerland.
COUNTRIES THAT HAVE BANNED CRPTOCURRENCY
Despite the immense profits earned due to cryptocurrency, there were many countries that banned all forms of cryptocurrencies including Bitcoin. The countries are:
1) INDONESIA
The Central Bank of Indonesia developed an innovative system of rules governing the advertising and commerce of cryptocurrencies, as well as a blanket prohibition on cryptocurrency, effective January 1, 2018.
2) BOLIVIA
The administration of this South American country has outlawed any currency that does not pass through the governmental watchlist of Bolivia's economic system. Bolivia's administration made the decision based on the possibility of various Ponzi schemes and illegal enterprises.
3) TURKEY
Turkey was one of the countries with the most money transfers before the nation's central bank decided to impose new guidelines making it a crime to use cryptocurrencies, explicitly or implicitly, for any services or goods. Anti-money laundering and anti-terrorism financing provisions were also included in the recommendations.
4) EGYPT
According to Egypt's primary Islamic advisory body, Dar al-lfta, any cryptocurrency transaction is called 'haram' under Sharia Law, and is strictly prohibited under Islamic law.
5) SAUDI ARABIA
Saudi Arabia has joined other countries in banning the use of Bitcoin in some or all of their countries. Because of their federated and anonymous nature, Bitcoin and other cryptocurrencies face unique challenges. The Saudi Arabia Monetary Authority is the country's central bank (SAMA). The SAMA Standing Committee drafted a warning on the trade-in of unauthorised securities on the foreign exchange market, which was published by SAMA. Financial institutions have been warned not to use bitcoin.
CONCLUSION
Cryptocurrencies have now become a hotly-debatable topic and trading in them have caused skepticism and confusion and now governments of various countries are banning them. This ban that took place in China has affected the world and after this bold step of China many countries have started considering this route of banning cryptocurrencies and Bitcoins. Bill Gates, expressed reservations about Bitcoin, the world's most popular cryptocurrency, in a recent interview with Bloomberg Television. The Chinese Communist Party (CCP) hasn't grasped it yet, but Bitcoin cannot be prohibited. It is a fool's errand not only because Bitcoin is a peer-to-peer, distributed network rather than a centralised, easily controlled network, but also due to the game-theoretic aspect of adoption. If one country prohibits Bitcoin but another accepts it, capital and people will flock to the best-treated country. The incentive structures for a country to accept Bitcoin rather than ban it are aligned. It is said by professionals that if people have lesser money than Elon musk they should be very careful before After China banned cryptocurrency, China has now planned to release its own cryptocurrency which would be specifically for the people of China. investing in cryptocurrency. Since China is not a democratic government all the decisions of the country would be in the hands of the government and hence this decision of the Chinese government seems to be valid by various people across the globe which was not very widely accepted by the world community. Hence this decision taken by China of banning cryptocurrency might be beneficial to the country on certain grounds but has resulted in huge losses for the rest of the world.
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