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Benefits of Blockchain

Mains -GS3- Technology, Mains -GS3- Economic Development

1. The Cryptocurrency has been banned and Regulation of Official Digital Currency Bill, 2019 has proposed stringent penalties, including 10 years of imprisonment, for holding, selling or dealing in cryptocurrencies such as Bitcoin. 

2. Due to high chances of cryptocurrencies being misused in money laundering, various government bodies such as IT, CBDT, and the customs departments have endorsed this endeavour.

3. It is important to put mechanisms in place to deter such issues but a blanket ban on all forms of cryptocurrency transactions will result in India missing out crucial technological leap.

Blockchain Technology

1. Blockchain can be described as a way for people to share extra space and computational power in their computers to create a global supercomputer that is accessible for everyone.

2. Every computer connected to a blockchain network helps validate and record transactions. People who connect their computers to a network are known as validators and receive transaction fees in the form of tokens.

Potential of blockchain

1. The blockchain industry is expected to see exponential growth similar to the smartphone industry.

2. Start-ups have already built thousands of apps on blockchain platforms like Ethereum.

3. These apps aren’t easily available to non-tech savvy consumers through an app store, and hence their usage remains low.

4. They also face technical problems such as scalability and slowing down of the network when many people use these apps simultaneously and companies are investing to solve these issues.

5. Blockchain technology has the potential to create new industries and transform existing ones. For instance, it has the capacity to facilitate Nano-payments proportionate to an individual’s contribution and value creation on the Internet, making it an ideal wealth redistribution tool for the digital age.

6. Big technology companies have started to take blockchain applications seriously. For instance, Facebook recently announced its own cryptocurrency to facilitate payments globally with minimal fees and no dependency on a central bank.

7. Venture capitalists invested $2.4 billion in blockchain and cryptocurrency start-ups in 2018. It is expected to exceed this benchmark in 2019.

8. None of the above is possible without the underlying tokens that facilitate transactions in a blockchain network.

9.  A law to ban holding or transacting in cryptocurrency would prevent Indians from reaping economic benefits by participating in blockchain networks and also stifle innovation related to this technology.

European example

1. The European Parliament and European Council are working on an anti-money laundering directive, known as AMLD5. The deadline for its implementation is January 2020.

2. All crypto exchanges and wallet custodians operating in Europe will have to implement strict know-your-customer (KYC) on-boarding procedures and need to register with local authorities.

3. They will also be required to report suspicious activities to relevant bodies. However, this will not fully solve the problem since it is not always possible for the exchange to know a beneficiary’s details.

4. The EU Commission is aware and has been mandated to present further set of amendment proposals regarding self-declaration by virtual currency owners, the maintenance of central databases and norms while using virtual currencies as payment or investment means by 2022.

5. This is a more reasonable approach, and the Indian government could follow suit.

Source: The Hindu