What is Crypto Currency?

Cryptocurrency is a digital form of exchange. Here the identity of the holders of crypto coins will be protected. These crypto coins are very limited. Creating new coins is not that easy. These can also be called as fiat currency. That is, these coins are not based on anything like gold, dollars etc.

In 2009, Satoshi Nakamoto (pseudonym) created Bitcoin, a crypto currency. After this Bitcoin many cryptocurrencies have emerged. But, countries of the world do not accept this cryptocurrency transaction.

These bitcoins have no such thing as a centralized authority. New bitcoins will be created according to a unified decision.

Then, in June this year, El Salvador accepted Bitcoin as legal tender for the first time. Cuba adopted it in August. However, China, where Bitcoin transactions take place on a large scale, banned all Bitcoin transactions in September.

Fear of cryptocurrencies

Currency is always the right of the government. That is the central point of a sovereign state. But the advent of cryptocurrencies calls this sovereignty into question. The value of the world's currencies (i.e. dollars, banknotes, and pounds combined) is $80 trillion. However, in 12 years since its launch, the cryptocurrency has been valued at $3 trillion.

This is why governments around the world continue to be apprehensive about these cryptocurrencies. All countries are reluctant to accept this uncontrolled currency.

Apart from this, the frauds and thefts that have happened so far in these cryptocurrencies have also raised fears about its security. In 2014, Mt. Gox, the world's largest Bitcoin exchange, declared bankruptcy.

The reason is that someone stole $473 million worth of bitcoins in its possession. All these are owned by the customers. 7 percent of the total bitcoins at the time were lost in the theft.

In some other moments, many people started using these bitcoins to get money illegally. Others compare these cryptocurrencies to scam schemes like Ponzi scheme, pyramid scheme, MLM etc.

What is the state of cryptocurrency in India?

As far as India is concerned, cryptocurrency transactions or investments are not authorized by the government. No monitoring system of the government is monitoring it. Investors are investing at their own risk.

In this situation, for the last two or three months, advertisements asking to invest in cryptocurrency have been appearing in full-page color advertisements in India's leading newspapers.

As the price of Bitcoin, the main cryptocurrency, is very high, these ads are published to split it into parts and make investments. These ads suggest that you can invest in these cryptocurrencies from as little as a hundred rupees.

It is at this stage that the Indian government has started realizing the need to regulate cryptocurrency. On Monday, November 15, the Standing Committee on Finance held its first meeting on cryptocurrency. Crypto companies like Internet Mobile Association of India, Lakshmi Coin participated in this meeting.

In this meeting, these companies seem to have said that the crypto market can be regulated and not banned. However, the representatives of the crypto companies are said to be unable to fully answer the various fundamental questions raised by the members of the Standing Committee.

In this context, it is expected that the Government of India will soon announce a decision on cryptocurrency.

But regulating cryptocurrency is impossible, says Anand Srinivasan, an economist from the Congress.

Anand Srinivasan says, "This cryptocurrency is based on the theory of Greater Fool. It will continue until there are people who will pay more and then the price will start falling. They are talking about regulating it. How will they regulate it? Who will they regulate when they don't know who is running it? That is not going to happen," says Anand Srinivasan.

Besides, Bitcoin is considered by many to be the only cryptocurrency. There are hundreds of coins like that. No one in the world knows who directs and controls all this. Anand Srinivasan says people from a country invest in a particular cryptocurrency and face huge losses if it crashes.

As an example, he points to the recent release of a cryptocurrency called Squid Coin, focusing on the game Squid on Netflix. Launched in October, the cryptocurrency was initially sold for one cent. After that, the price of the stock rose to $2,861 per coin.

But that day, the creators of that crypto sold all the coins and cashed them out, leaving the Squid Coin worth nothing.

"Nobody knows how many lakhs of crores of rupees are invested in this crypto currency in India. Some say six lakhs crores. Some say 3 lakhs crores. If the government wants to, it can restrict the flow of crypto investments from banks to a certain extent. That's all it can do." Anand Srinivasan says.

Also, the price fluctuations of cryptocurrencies can happen very quickly. This is further complicated by the fact that the common investor cannot understand its background. For example, in 2017, when the price of a single bitcoin was around $20,000, it suddenly dropped by a third in one day. In 2018, its price came to just $3,122. Lakhs of crores of rupees disappeared from the crypto market.

Therefore, an investor is advised to invest only as much money as he is willing to lose.

But for supporters of cryptocurrencies, they say that cryptocurrencies are the best way to earn profits in the short term. Besides, they say, inflation can be controlled in the future.

But what investors should pay attention to is the warning text that appears in the fine print below cryptocurrency ads. "Cryptocurrencies are unregulated digital assets. Not legally tradable anywhere. Past performance does not guarantee future results. Be careful before investing," reads the slogan.