Cryptocurrency impacts environment and also has other pitfalls
Cryptocurrency like Bitcoin are energy intensive, highly decentralized financial system. There are many advantages but the dangers are equally very high. The highly decentralized and anonymous nature of crypto coins makes it an ideal option for use by criminals, drug dealers and terrorists. This is one of the reasons why the Indian government is going to introduce a bill which seeks to ban all forms of private cryptocurrencies.
Cryptocurrencies is in news today and a hot debate is going on whether it should be allowed in India. A number of benefits have been attributed to the use of cryptocurrencies and the Blockchain technology, it uses, can be applied to a number of other applications. However, just like any new technological innovations, the benefits and disadvantages are evident only after a period of time.
No threat of inflation with cryptocurrencies
Cryptocurrency could become replacement for fiat currencies. The present financial regime is fraught with numerous pitfalls. Since cryptocurrencies are available in finite quantities, the threat of inflation is practically nil.
The present financial regimen envisages continuous printing of currency gives rise to inflation. Most nations around the world depend upon deficit financing and this in turn erodes the value of the currency. In other words, your savings over a period of time depreciates and loses its value.
If Cryptocurrency becomes universal, many countries will lose their political clout
This can be seen in many Latin American and African nations where the local currency has lost its value and is useless. Cryptocurrency is very popular in such countries because investing in cryptocurrency does not erode the value of the investments over a period of time since the number of crypto assets is finite.
However, most nations don’t want their hold on finance to slacken, given cryptocurrency is a decentralized currency which is based on Block Chain technology. If Cryptocurrency becomes a universal currency, many countries will lose their leverage and political clout. This is also one of the reasons for nations to ban cryptocurrency.
Being anonymous, cryptocurrency is an attractive option for drug dealers, terrorists
The fact that cryptocurrency is anonymous also makes it an attractive option for drug dealers, terrorists, to siphon off their ill gotten gains. Anonymity makes it virtually impossible for security agencies to track any cryptocurrency transactions.
In recent times, a ransom ware attack was made on Colonial Pipelines in North America. The attack was conducted by a group of hackers deep in East Europe. The ransom was paid in Bitcoins and it was almost impossible to trace the transaction by even the FBI.
The last factor which goes against Cryptocurrencies is the gigantic amounts of energy required to conduct mining of crypto tokens. Earlier lured by cheap labour and electricity, numerous mining hubs came up in Northern China. However, after a recent crackdown by the Communist government, mining activities have shifted to other countries including India.
The proposed bill which is to be tabled in the Winter Session will be the first attempt by the Indian government to end ambiguity surrounding cryptocurrencies. Many nations including India are also contemplating releasing their own Cryptocurrencies or digital currency.