Modi government should not ban cryptocurrencies. But regulation should not be too loose

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TeaThe Regulation of Cryptocurrency and Official Digital Currency Bill, 2021, which is likely to be introduced The Lok Sabha, in the upcoming winter session of Parliament that begins on November 29, will signal the end of private cryptocurrency deals in India and introduce a regulatory framework in the sector. The official digital currency offered by the Reserve Bank of India will be recognized and will, in all likelihood, be the official cryptocurrency of the country.

The broad consensus seems to be that it would be prudent on the part of the Narendra Modi government to regulate this business rather than ban it outright. It is feared that the nearly 100 million Indians who own or deal in cryptocurrencies will continue to dominate it despite the ban, making it the largest underground black market illegal financial trade in decades. The stock market will become insignificant.

The worst fear of any online trading activity and agency in the private or public sector is the possibility of a cyber attack. According to the Indian Computer Emergency Response Team (CERT-In), there have been over six lakh cyber security breaches and 12,000 incidents in government institutions in the first six months of this year. Malware originating from Pakistan, which previously targeted the power sector and government organizations in India, has now mutated like a real-life virus to adopt new cyber-attack capabilities.

Back as Lotus Labs reports, the modified remote access trojan, dubbed ‘ReverseRat 2.0’, “includes functionality such as taking remote photos via webcam and recovering files on USB devices inserted into compromised machines”. According to reports, Afghanistan, India, Iran and Jordan were among those governments. targeted By attackers using a forged United Nations Meeting Forum (UNODC) to lure government targets.

For example, Coin Pte Ltd, which trades under the Liquid brand name, is exempted from holding a license by the Monetary Authority of Singapore (MAS) to provide digital payment token (DPT) services and have warned Customers say that if the business fails they will not be able to recover all the money paid to them or the DPT. In August this year, the company was the victim of a cyber attack, which resulted in Theft $97 million worth of cryptocurrency assets from its Warm Wallet (an online account used by customers for easy access to trade in cryptocurrency).

A cyber attack on government-run or licensed cyber exchanges would seriously erode investor confidence in other markets that trade in financial instruments as well. The regulatory body needs to protect all such exchanges and financial markets from such a situation.

Read also: Modi government will consider allowing crypto trading for some investors

not just another trading activity

Cryptocurrencies arose from the idea of ​​’mining’ bitcoin using high-end computers with a complex algorithm and multiple tasks running in parallel. Soon, blockchain technology became more popular than the final product. The biggest advantage of this technique was that the merchant could easily hide all the personal information. This in itself becomes the source of many illegal, shady and anti-national activities. Attempts at regulation by the government seem to be the right way to stop the misuse of technology, but it yields maximum benefits. Like any other “legally permissible gambling business”, this trade in government-generated cryptocurrencies will generate enough profit to be taxable. This tax revenue may have been one of the incentives for the government to allow this trade with a ban rather than a ban and to lose the “sin tax”.

Cryptocurrency is not just another trading activity. He has the ability to turn into a deadly weapon in the wrong hands with sinister intentions. Trade in weapons and weapons, including medium-range nuclear weapons, is possible with cryptocurrencies, without having to go through openly traceable computer operations that are easy to track.

To trace transactions and protect customers’ privacy, cryptocurrency platforms use various technologies such as Dual Key Stealth Address Protocol (DKSAP), which allows the sender to generate a new address for each new transaction. . By using Ring user signature technology, the sender can make the transaction completely untraceable. Multiple such transactions may originate from one source but reach different buyers or beneficiaries, without anyone in the ring knowing the other, not to speak of security agencies. Finally, the logic of zero knowledge brief non-interactive knowledge (Zk-SNARKs or Snark as it is referred to) is devised to conceal account balances, leaving the currency holder with important personal information or even Allows to authenticate and validate transactions without revealing the location.

The government’s new regulation should seriously consider implementing technology mechanisms in such a way that every cryptocurrency deal, such as stock market operations, must be traceable and subject to scrutiny and audit. The idea behind such a mechanism should be to prevent cryptocurrency trading from turning into a tool that could compromise national security.

This does not mean that the user will have to surrender his personal information or compromise his privacy for the sake of net profit. Like any other financial instrument, cryptocurrency should have all the features to guarantee the security of information of a confidential nature but allow authorities to detect fraud, income concealment, misuse with anti-national intent or security breaches.

Government regulation may need further reforms over time but it is certainly a good start, which will test both the integrity of the market and the wisdom of the government.

The author is a former editor of ‘Organiser’. He tweeted @seshadrichari. Thoughts are personal.

(Edited by Prashant)

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