Basics of Crypto Currency and Central Bank Digital Currency

Crypto Currency : It is a digital asset created from a code. It is designed to work as a medium of exchange wherein individual coin ownership records are stored in a digital ledger, computerized database using strong cryptography to secure transaction record entries, to control the creation of additional digital coins and to verify the transfer of coin ownership. First decentralized cryptocurrency BITCOIN was created in the year 2009.

Crypto Currency is decentralized and has not been approved in India by any regulating authorities. Since there are no guidelines, rules and regulations in this regard, the investors are investing in cryptocurrency at their own risk. Further, high number of investors can be seen in this market which is a concern area for the government.

The total number of Crypto Owners in India stands at10.07 crores which is highest across the world. However, when it comes to Crypto awareness India has scored 4.39 points out of 10, which is not that great if we are investing our hard-earned money in a market which is not protected by any law.

As, we can see from the below table, that despite a vast base of crypto owners, India sits at fifth position when it comes to crypto owners as a percentage of the total population i.e. 7.30%. Ukraine ranks first in this list with 12.73 % of the total population owning crypto, followed by Russia (11.91 per cent). 

Basics of Crypto Currency and Central Bank Digital Currency

Source: Brokerchooser

Looking, into the current scenario, the Government is going to introduce ‘The Cryptocurrency and Regulation of Official Digital Currency Bill 2021’ in Parliament during the ongoing Winter Session. After, this announcement, panic gripped the crypto market in India. 

On 30th November, 2021, Finance Minister Nirmala Sitharaman said on Cryptocurrency during Question Hour in Rajya Sabha “This is a risky area and not in a complete regulatory framework. No decision was taken on banning its advertisements. Steps are taken to create awareness through RBI and SEBI. The Government will soon introduce a Bill”.

For full clarity, we will have to wait till Cryptocurrency Bill 2021 comes into the public domain.

Let us now understand what is CBDC – Central Bank Digital Currency : 

It is a digital form of Fiat money (which are issued by regulatory bodies). It is different from Virtual Currency and Cryptocurrency which are not issued by state and lack legal tender status declared by the Govt. 

  • Unlike cryptocurrency, the CBDC would be centralized.
  • With the help of this people will be able to directly send the money with relying on intermediaries like Bank, clearing house etc.
  • It is just like paper currency and each unit is uniquely identifiable to prevent counterfeit.
  • Bank of England was one of the first organizations to initiate a global discussion on the prospects for the introduction of CBDC.
  • Central Bank of Sweden is closest to consider its implementation and started testing technical solutions for its r-Krona in 2020.

Writer : Dr. Mamta Godiyal 

Please Note : Investment strategies can vary from one person to another and one goal to another depending on their financial situations, objectives, and risk tolerance. These are author’s own views. Readers are requested to do thorough research before investing as investment is subject to owner’s risk.)