Opinion

What is Private Cryptocurrency? Regulations of Cryptocurrency around the World

Snapshot:

  • Definition of “Private Cryptocurrency”.
  • Is Bitcoin considered as Private crypto?
  • Crypto Regulations around the world.

Cryptocurrencies have gained a lot of traffic and interest from the Indian masses for various reasons. The major reason being the Bullrun various crypto have had in 2020. The safety and usage of Cryptos along with its regulations are among the most discussed topics since the Indian audience has got a glimpse of RBI’s Proposed Bill on Private Cryptocurrencies in Budget 2021.

What is Private Cryptocurrency?

Cryptocurrencies are digital currencies that can operate as a medium of exchange at a peer-to-peer level and enable direct payments between individuals. The term Cryptocurrencies has often been equated with Bitcoin and Blockchain due to lack of clarity as to what each of them is. Since the entire blockchain technology is developed using the principles of asymmetric cryptography, it was wise to call Bitcoin or any mode of exchange on a blockchain, a cryptocurrency. The idea behind the invention was to find a way to be independent of a central authority while producing a means of exchange that is secure, immutable, and verifiable.

All cryptocurrencies operate on decentralized platforms. This indicates it is not controlled by any central authority. Since blockchain technology has a decentralized nature, it makes it impossible for the government or any centralized regulatory body to control cryptocurrencies or interfere in its domain for that matter. All transactions once made by this system can neither be reversed nor be faked. Cryptocurrencies and also trading with Cryptocurrencies are the most significant ways to solve the problem or confusion regarding digital cash. This whole attempt also helps to maintain the integrity of the decentralized system and increase awareness around the financial revolution.  

All transactions once made by this system can neither be reversed nor be faked.

The recent proposed RBI bill for the Budget session 2021 has hinted that RBI is looking forward to work on the central bank digital currency (CBDC). While the bill had stated negatively about allowing private cryptos to be used in the market, it has also pointed out on providing certain exceptions related to the technology involved and heavily used by all known cryptocurrencies. This bullet-in has made the Indian Exchanges, such as CoinDCX, WazirX and others, dealing with cryptocurrencies, question the possibility of joining hands and getting into conversations with the governing body around the said context. Having said that, there is no clarity about what the Bill exactly meant as a private cryptocurrency. 

Also, read: Proposed Legislation 2021.

As mentioned, there are no cryptocurrencies that can be deemed as private, however, there are a few known crypto coins which are known as privacy crypto. Such as Monero. [The crypto’s popularity has been on the rise, primarily due to its ability to help anonymize users. Monero transactions are much more difficult to trace because they use ring signatures and stealth addresses. These methods help to hide the identities of the sender and the receiver. Additionally, Ring Confidential Transactions, or RingCT, helps to conceal the transaction amount, providing more privacy.]

Trading at $157.30 as of December 24, 2020, Monero was the fourteenth-largest cryptocurrency by overall market value, coming in at roughly $2.8 billion.

NOTE: Other such coins are Zcash, DASH, Verge, Horizon, Beam etc. 

Is Bitcoin a private cryptocurrency?

Bitcoin is a digital form of cash that was invented in 2009 by a person (or group of people) called Satoshi Nakamoto. His stated goal was to create “a new electronic cash system” that was “completely decentralized with no server or central authority.” The probable causes of that were: 

  • prone to inflation.
  • not private.
  • separated into 180 different currencies.
  • hard to divide into smaller fragments.
  • vulnerable to rising transaction fees and much more. 

Satoshi had a plan to create a purely peer-to-peer electronic cash that would not have properties of the fiat currency. Bitcoins can be sent from person to person without the need for a financial institution. The entire system of Bitcoin functions due to the work done by a group of people called miners.

Read more: What is Bitcoin?

Any and every transaction made in Bitcoin or by trading Bitcoins takes place within a public ledger, blockchain, which everyone can verify.  This public nature of Bitcoin makes it a cryptocurrency that is far away from being privately held. 

The reason why Bitcoin is sometimes misunderstood to be a privately owned crypto is maybe because of how popular it is. Even more so because of the Bullrun it had in 2020. 

Some myths around Bitcoin are:

  • Bitcoin is the same as blockchain: No, Bitcoin is one of the cryptocurrencies whose transactions take place in the public ledger called Blockchain. 
  • One can only buy a whole Bitcoin: Anyone can buy a Bitcoin starting from a molecular fraction to a whole Bitcoin. There are no limits to this. Neither are there any limits on how many fractions of Bitcoin one can buy or invest in. 
  • Bitcoin is private: Since an individual named Satoshi Nakamoto first introduced Bitcoin to the mass, it is often thought to be privately held. No Bitcoin has any physical presence. There are only balances on a public ledger that anyone can have transparent access to. 

Regulations of Cryptocurrency.

Ever since the inception of the Cryptocurrency and the possibility of its usage through blockchain has been adventured by the masses, both anticipated and unimaginable developments have been made possible in the crypto space. But all these innovations and experiments were running themselves without some form of crypto regulations. 

The vast possibilities of these decentralized cryptocurrencies had to then welcome some impactful regulatory laws which will help the world see how different countries are viewing and treating cryptocurrencies. Since then, all kinds of emerging markets and crypto exchanges around the world had been subjected to various regulatory circumstances. Coming to the Indian perspective, the RBI is yet to mention specifics around the same. Mentioned are some examples regarding regulations of cryptocurrencies around the world : 

United States, Canada, South America:

Being highly developed and most definitely home to the largest economies in the world, the United States has remained a pre-eminent face in the world of Cryptocurrencies. Not a surprising name to start off the list, right? 

Cryptocurrencies are notably popular in the United States markets and that gives the markets dealing with this sector seemingly immense opportunities to develop and implement any associated ideas or administer a cryptocurrency business. The engagements and business are increasing every day as some of the major American ventures have introduced payments via digital currency.  The influence of the US develops further than just its own economy. Any regulations or a new trend that gets accepted in the US has a direct influence on the markets worldwide. 

A recent example would be how Dogecoin surged up to 800% in the markets after Elon Musk tweeted about the same. Read all about that here

Now how are cryptos viewed in the United States? FinCEN, a bureau of the Treasury Department, made it clear that “virtual currency does not have legal tender status in any jurisdiction.” As for exchanges, they are legal although regulation depends on the state. The Securities and Exchange Commission originally viewed digital currency as a security, but have since made it clear that both BTC and ETH are no longer securities. Initial coin offerings have been the centre of much debate from the agency, pushing to introduce more regulation to closely monitor any potential scams or fraudulent activity.(Source: CoinBundle Team) 

Dogecoin surged up to 800% in the markets after Elon Musk tweeted

In the Canadian context, regulations around the digital currency are known as Money Services Businesses or MSBs. These MSBs are implemented to protect their economy from laundering or terrorist activities regarding finances. Canada is one of the first countries in the world to officially state regulations around cryptos after rigorous debates within numerous governing bodies. 

In a nutshell, America has the majority of its nations who are crypto-friendly and already have their crypto regulations in place or are in the planning stages of implementing them. Since the crypto space is only a decade old industry, we are still to witness many more regulations being proposed or submitted over time. 

Europe:

We find some of the most economically adequate countries in the world in Europe, some of whom have emerged as leaders in the digital currency space. “In the UK, the FCA has to be authorized to operate an exchange that enables the trading of crypto-assets, which are financial instruments under the Markets in Financial Instruments Directive II (MiFID II). Businesses authorized by FCA must comply with FCA’s crypto assets. Bitcoin regulations are an example of these crypto assets. In the UK, consumers can easily buy crypto asset products like Bitcoin. The most important factor in buying and selling crypto assets is to ensure that cryptocurrencies are not used to finance terrorism or money laundering. Therefore, crypto businesses have to register with FCA regulations. Cryptocurrency companies applying to register with FCA have taken their responsibilities seriously to anti-money laundering criminal proceeds in businesses.

In the UK, consumers can easily buy crypto asset products like Bitcoin.

It controls its customers who buy and sell currencies with Know Your Customer (KYC) procedures in many Crypto businesses in the UK. KYC can provide businesses with information such as customer IDs, passports, driver’s licenses, photos. Likewise, with the Customer Due Diligence (CDD) procedures, customers’ risks are determined, and precautions are taken according to these risks. Such measures are aimed at anti-money laundering and terrorism financing in crypto businesses. Cryptocurrency bitcoin regulation in the UK is very complex, and many other issues need to be addressed.”  (Source: Sanction Scanner)                                   

India:

In the Indian context, regulations around Cryptocurrencies are yet to be determined. In 2018, when RBI banned the banks under its regulation to stop having anything to do with transfers related to Cryptocurrencies. After a couple of years when the reasoning and argument about the subject matter of RBI and Cryptocurrencies led the Supreme Court to squash what RBI was proposing did the Indian Market open up to welcome the Crypto space within. 

Read more: The Crypto vs RBI Argument.

Since before the RBI ban in 2018, crypto exchanges in India like CoinDCX, Zebpay, Coinswitch have been working on making the decentralized economy bloom in the Indian market. Their efforts were obstructed to be explored further when the RBI banking ban was implemented. Even though the future for a smooth crypto market seemed like a distant possibility CoinDCX was the first cryptocurrency exchanges in India to integrate banking transfers within the first 6 hours of the Supreme Court judgement.

It is important to first understand what the bill will be classifying private as.

Fast forward to recent times, the Budget session 2021 mentioned a Proposed Bill which talked about banning ‘Private Cryptocurrencies’; though there is no official label of private cryptocurrencies recognized elsewhere, it is important to first understand what the bill will be classifying private as. The next point to think about is that the RBI is considering prohibiting private cryptocurrencies barring few exceptions. The RBI bill also states that they are considering an introduction of RBI’s Central Bank’s Digital Currency (CBDC) for the public. This stands to show that the Indian government is open to integrating technological innovation with blockchain at a large scale. 

Also read: Proposed RBI Bill 2021.

Safe Cryptocurrency Exchanges.

What Cryptocurrency should I invest in 2021?

According to the cryptocurrency trends at the time of writing, The fastest-growing Cryptocurrencies are:

Cryptocurrencies Growth % in 2020
Bitcoin Surged over 200%
Ethereum Seen 25% rise since December 2020
Ripple 12.49 % 
Litecoin 140%
Chainlink $11.14 (last trading amount)

 

Bitcoin:

Bitcoin is the first cryptocurrency to come into existence. It was first created in 2008 by an individual or group of individuals operating under the name Satoshi Nakamoto. It was intended to be a peer-to-peer decentralized electronic cash system.

Click here to buy Bitcoin.

Ethereum:

Ethereum is an open-source, public, blockchain-based distributed computing platform and operating system featuring smart contract functionality.

Click here to buy Ethereum.

Ripple:

Ripple is a real-time gross settlement system, currency exchange and remittance network created by Ripple Labs Inc., a US-based technology company. Released in 2012, Ripple is built upon a distributed open-source protocol and supports tokens representing fiat currency, cryptocurrency, commodities, or other units of value such as frequent flier miles or mobile minutes. Ripple purports to enable “secure, instantly and nearly free global financial transactions of any size with no chargebacks.” The ledger employs the native cryptocurrency known as XRP.  (Source: Wikipedia) 

Chainlink:

Each cryptocurrency has its blockchain – the digital ledger that stores all transaction records. Chain Linking is the process that occurs if you exchange two cryptocurrencies of different blockchains. This requires the transaction to be lodged in two separate blockchains, so they must link together to achieve the goal. 

Also read: The Chainlink Drama.

How to start investing in Cryptocurrency?

Investing in cryptocurrency or trading in cryptocurrency cannot get as easy as starting your journey with CoinDCX Go. The CoinDCX Go app has been architectured after taking into account the insights from various sources. It has advanced its functionality to give the users an efficient investing and easy transaction experience. All your orders are automatically executed without you going through the hassle of entering your trades in the order book. Gone are the days where you had to wait for trading orders to process or had to face delays in receiving money in your bank accounts. CoinDCX Go can help you exchange your funds at a lightning speed.

Learn how to use CoinDCX Go.

Learn more about CoinDCX Go.

 

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