About Crypto-currencies Bitcoin

 All about Crypto-currencies including Bitcoin

-Dr. Lalit Kumar Setia*

Does holding Crypto-currencies or Bitcoins considered illegal?

In 2009, a virtual currency came into the market known as Bitcoin, the world’s first decentralized currency. Bitcoin isn’t controlled by any government or bank. Even the currency can be transferred without paying taxes or at the lowest cost than other means of transferring money. Another point of consideration, is its volatility, in January 2013, one Bitcoin was valued at around $14, and in November 2013, its value peaked at $1,124. It is well known that good currencies have low volatility, those who are owning unstable currency (Bitcoin) or accepting it as a form of payment are taking a huge risk. Using Bitcoins need e-wallets, exchanges, and payment processors and even these IT-based services are still in question due to increasing cybercrimes. The surge in the price of Bitcoin is due to its illegal use, particularly in the online dark-net marketplace Silk Road.

Holding of Crypto-currency in India:

In Feb 2018, then Finance Minister Sh. Arun Jaitely stated that Government will do everything to discontinue the use of Bitcoin (Crypto-currency) in India for funding criminal uses and the Reserved Bank of India (RBI) announced a ban on the sale or purchase of crypto-currency for the entities regulated by RBI. In March 2020, on the petition of the Internet and Mobile Association of India, the Supreme Court passed a verdict to revoke the RBI ban on cryptocurrency trade. Now Government of India is exploring to create and launch a digital currency, issued by RBI and banning private Crypto-currencies such as Bitcoin.

The popularity of Bitcoin and Crypto-currencies:

Bitcoin is private and totally anonymous however its popularity has opened the doors for several other cryptocurrencies like Litecoin, Dogecoin, Peercoin, and  Quark coin. These crypto-currencies have no safety mechanisms and the investors or buyers get private keys or random words to protect their wallets. In case the key or random words are lost, the funds are also gone as there is no support to recover or change the password. If the Bitcoins are stolen and there is no authority to approach them. Let's recall the case of Mr. Gox when he went to bankruptcy, no one took care of thousands of people which Bitcoin was stolen (according to them). Even the Japanese government took actions against Karpeles and the company.

Even after such happenings, people increasingly prefer to be rich by making investments in Crypto-currencies due to one fact that such currencies are impossible to counterfeit and these currencies network allows money to be secured against theft and loss by using strong mechanisms of backups, encryption, and multiple signatures. As far as the use of crypto-currencies in money laundry is concerned; any currency even if it is not crypto-currency be used in money laundering, considered illegal around the world. In case, Bitcoins are banned in any country, there will be an impact upon businesses and markets of the country. Bitcoin exchanges keep records of each transaction and can be inspected by the authorities in order to check its use in money laundering or other illegal activities.

How new Bitcoins are generated and come into circulation?

The Bitcoin networks reward individuals through a competitive and decentralized process known as “mining”. Bitcoin, being a cryptocurrency is a digital unit (encrypted with technology) that has the capacity to be traded and operated independently of any bank. At the initial stage of introducing new bitcoins, it is like initial public offerings of a share in the stock market; known as initial coin offerings. The new Bitcoins are generated at a flat rate and their value is not governed through keeping physical properties like Gold or Silver rather its value is based upon properties of mathematics. Its price is determined by demand and supply. There are experts who are considering it a Ponzi scheme means a fraudulent investment operation that pays returns to investors in response to their invested money. Bitcoin is not a scheme, rather it is free software that doesn’t permit making a fraudulent investment. However, early adopters of Bitcoins have been benefited a lot due to the risks they have taken by trusting upon this cryptocurrency. The supply of Bitcoins is limited to 21 million Bitcoins but if the number of transactions is increased, making its demand more; then transactions can take place in sub-units of Bitcoins (i.e. bits, there are ten lac bits in a Bitcoin).

The volatility in the price of cryptocurrencies doesn’t affect their benefits in terms of transferring money from one point to another. In crypto-currencies, today Bitcoin is the most popular decentralized currency but it is possible that more virtual currencies took place in the future and are more dominated than Bitcoins and at that time the demand for Bitcoins can also go down, making its price a big downward trend. Even if, the governments start imposing fewer charges on the transfer of money from one point to another, then also the demand for Bitcoins or other cryptocurrencies can be affected and price can come down.  

Whether Investments in Bitcoins are Secure or not?

The Bitcoins network is claimed to be the biggest distributed computing project in the world[i] based on protocol and cryptography, with a strong security track record. However, if users’ wallet files that store a private key(s) are deleted accidentally then it is not possible to recover the Bitcoins back. The Bitcoin networks are strong and updated from time to time to avoid the risk of being hacked. With multi-signatures in each transaction, the security can be said stronger than online banking. However, the systems based on cryptography are vulnerable to quantum computing, and to date, quantum computers don’t yet exist. In case quantum computing is possible in the future, the Bitcoin protocol will have to be upgraded to post-quantum algorithms.

As per the news of Times of India dated 20^th March 2018; the police of Delhi received a case relating to the theft of Bitcoins worth 41 Lacs from the e-wallet of a woman. The woman claimed that her wallet account was hacked by an unidentified man. Bitcoins can be hacked only if the account details are disclosed, therefore an investor of Bitcoins should not disclose the email account, passwords associated with the Bitcoins. 

In Feb 2021, Bitcoin had surged to $39000 and become the world's biggest cryptocurrency. 

*Copyright © 2018 Dr. Lalit Kumar. All rights reserved. 

This article is written by Dr. Lalit Kumar Setia; a renowned author and trainer. He completed his Doctorate in Commerce from Kurukshetra University Kurukshetra and MBA in Information Technology from GJU, Hisar. He also wrote two books, 15 research papers, and organized more than 200 Training Courses during his working period since 2006 in Haryana Institute of Public Administration, Gurugram. The article was firstly published in 2018, and last updated on 10th October 2021. The writer can be contacted on lalitkumarsetia@gmail.com 

Read more:

How Income Tax Department is keeping eyes upon Citizens of India - https://drlalitsetia.blogspot.com/2021/05/income-tax-department-is-looking-you.html  

and how in Government organization, Utilization Certificates are required to be prepared and submitted: 

https://drlalitsetia.blogspot.com/2021/01/utilization-certificates-of-grants-and.html

---

[i] This information has been retrieved from https://bitcoin.org/en/faq

New Economic Problems

New Economic Problems

-Dr. Lalit Kumar

Economic Situation of India after Covid-19:

It is worth to mention that India allocated Rs. 2 Trillion during the last 5 years for increasing the production in various sections like Autos, Textiles, Food Processing, Solar Energy Equipment, Telecom etc. The Foreign Direct Investment (FDI) is being attracted to finance the needs of the sectors, however, efforts are being made for “Atam Nirbhar Bharat” as well. Today, India is leading whole world in Software, Autos, and Pharma Sectors. The incentives on productions and imposition of custom duties are making the environment friendly to the domestic production units. In last few years, the Indian Economy has been affected adversely from the bankrupt companies and the unemployment also has been increased.

India is not performing well due to lack of Research and Development and also not implementing the best practices or innovative ideas based upon already done research. It is required to inculcate the culture of Research and Development (R&D). There are lack of incentives for doing R&D to the Academicians and Scholars, Scientists, and Professionals. The agitation of farmers to Contract Farming, has changed the scenario as well and the industrialists are feeling stressed from it. The land prices are increasing due to new land acquisition law and labour cost is also increasing due to impact of Covid-19. The use of Apps for remote education and training, also changed the whole scenario. 

New Economic Problems:

Both the developed and developing nations are suffering from some new economic problems which are required to be identified by the Governments. The unemployment and corruption are old economic problems which are still getting attention of the Government and the Good Governance initiatives and Entrepreneurship Programmes are particularly to target these two big problems of the countries. The world bank is also funding the initiatives of the nations to make them empower to fight with such economic issues. There are a few new economic problems affecting the countries which are required to be focused to improve the financial performance and economic status of the economies:

1.   Improper planning in making policies:

Most of the policies are made by sitting far from the people affected with the problems and the policies are impractical due to ignorance of ground realities. Many countries are dreaming to demonetize the currencies which the people have not been provided access to the technological means in the countries. India is a latest example where demonetization not showed the desired outcome. The economists found that the decision of demonetization was taken in hurry and there was lack of planning while formulating the policies relating to demonetization in India.

2.   Unequal utilization and excess exploitation of economic resources:

The non-performing assets in banking sectors of the nations including United States of America (USA) are increasing due to unequal utilization of the economic resources. The development of metro cities, smart cities, and use of information technology are not equally distributed around the world and this has also contributed in rise in unemployment, the traditionally well-known economic problem of the countries.

3.   Terrorism with support of unemployed youth:

The terrorists have become successful in targeting the intellectual people to work with them. The unemployed youth not getting access to economic resources to meet their requirements to stand with other equally qualified persons, preferring to use their qualifications in harming others after getting financial support from the terrorists. The attacks in United States, India, Pakistan, and other nations clearly show the use of technology and it is possible only after the success of terrorists in getting support from the well-qualified unemployed youth.

4.   Depreciating currencies:

The countries’ currencies are not depreciating not in terms of comparative assessment but in terms of amount of resources i.e. purchasing power. The financial resources are being costlier. The concept of keeping gold as reserves for issue of currency and the concept of keeping foreign currencies to represent the same gold reserves; are now no more being followed. Due to unnecessary interference in increasing the demand of currencies, the economies are suffering from the depreciating value of their currencies.

5. Inefficient Management of Growing Waste:

I attended a session on “Waste Management” today and realized that everyone of us, is a waste generator. We know it and as a part of society it is our duty to reduce the waste. For one person which is not a waste, for other person, it may be waste. The resource person rightly gave an example that a person taking pics of a lake, may think that the pics are not waste but for others, it can be waste. Therefore, every one of us is a waste generator. Dr. Sanjeev Chaddha concluded that the best way to reduce and eliminate waste is to send it back to the place from where it is generated. For example, Wet waste comes from soil and fields, it can be used as compost for the same fields to increase the agricultural produce of the soil. The plastic waste comes from the polymers which comes from the petroleum industry, therefore best way to dispose it is to convert it into petrol or use it for power generation. The e-waste is very harmful which is generated from gadgets of information technology, the waste should be recycle and reused for the same industry.

With the growth in population, the cities are growing and also contributing to increase in the waste. The per capita waste is 100 grams in a city after growth, it becomes 500 grams per capita. The huge waste becomes difficult to be managed by the Government as there are limited places to recycle and reuse the solid waste. In future, the situation can be more critical as people are not much sensitive to reduce the waste and be less waste generators. 

*Copyright © 2020 Dr. Lalit Kumar. All rights reserved. 

You might also be interested in the following:

1. Functions of Officers of PWD

2. Untold story of IL&FS

3. How to save money from being covered under taxes (Tax Saving Options)?

4. Parents in nurturing Children

5. Viruses and Infections

6. Let’s kill the pain without using painkillers

7. Don’t be afraid of Higher Uric Acid Level indeed adopt these remedies

8. Types of Tenders in Government

Government Interventions Work Temporarily

Government Interventions Work Temporarily

The Government intervenes to ensure economic development at higher rate but the interventions work temporarily. What to do for permanent solution to economic problems?

Each government intervenes through various measures of fiscal and monetary policy to ensure the economic development of their economy. The interventions improve the situation as per the desire of the government but not bring a permanent change. What can bring the permanent change and how policymakers of India can perform in today’s scenario?

The Control over Social Media Platforms in India:

The Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules 2021 were formed and released by the Ministry of Electronics and Information Technology (MeitY) in February, 2021. 
The Government gave three months time to compliance these rules to the Social Media intermediaries. There are seven major Social Media intermediaries in India i.e. Google, Facebook, WhatsApp, Telegram, Koo, Sharechat, and LinkedIn. As per new norms, a resident of India would be Grievance Redressal Officer for timely resolutions of the grivances of the users of social media platforms. Further, a Chief Compliance Officer will also be appointed for ensuring compliance of IT Act and Rules and there will be a monthly compliance report be prepared with the details of complaints received and action taken. 
No doubt, the rules are challenged on basis of freedom of speech and expression in India, but keeping in view the national security many experts favoured to implement the Act and Rules. The fake news are affecting the life of common men and users of social media. There are many instances when abusive language is used on the social media and automatic system of complaints not worked properly to block or take action upon the persons responsible for it. The mob violence is also due to misuse of social media platforms. Now after receiving complaints, the technological companies have to remove the reported content within 24 hours. Even first originator of information will also be identified by the companies. However, the tracibility of such originators is really difficult and tedious task required to be done by the social media intermediaries that is why a few are hesitating to implement such rules. 
This intervention of Government will work to control the misuse of the social media platforms but at the same time will affect the free speech, which is a basic tenet of Indian Democracy.

Why it is bad to safeguard economy through interventions?

The intervention of central banks of countries to safeguard their currencies can work in appreciating or depreciating the value of the currencies but such changes are temporary. The issue of securities by the United States of America for appreciating the value of Dollar and in order to pay higher rate of returns upon issued securities, the USA has to perform for higher rate of return which will cost the economy and its citizens. Ultimately, the current account deficit (CAD) of the country will rise due to this particular step and to correct the situation, the USA’s Dollar will automatically depreciate. What can be the best strategy to improve the value of currency? How without any intervention, the currency can be appreciated or depreciated? The monetary and fiscal policies of the countries make temporary changes in the value of the currencies, then what can be done for bringing the permanent change? How China is competing with the world without making such interventions, is a lesson for the other countries.

In India, during 2018-19 and 2019-20, it is felt that the economic growth became stagnant and prices also started rising. Such condition of economy is known as "Stagflation". In such case, how Government intervene?

There was 7.35% rise in the consumer price during December 2019 due to rising prices of Onions, Potatoes etc; the temporary intervention to buy onions and selling through depots worked to control the inflation but it harm the 'free market conditions' and the business men suffered from losses due to lower sale of their procured onions. The Reserve Bank of India (RBI) became under pressure to cut the rates for improving the liquidity in the economy but due to Stagflation and fears of inflation, was not able to cut the rates in February 2020. 

The Government has started to consider the supply side solutions to this problem of Stagflation and definitely there are chances to tackle this problem by encouraging manufacturers and service providers to increase their productivity and quantum of the services delivered.

Where to focus for improving the value of currency?

Let’s focus upon the fall in the value of rupee, why it is depreciated after the independence of the India? More the expenditure upon developmental or non-developmental functions of government, directly or indirectly depreciated the value of rupee. The productive work of entrepreneurs leading to more collection of taxes, increase in employment, reduction of poverty etc; also appreciated the value of rupee. Developed nations are more progressive because the citizens of nations are more comfortable to generate the employment opportunities and are working to perform better with their strategies without being worry to pay the taxes. While in developing nations, the rates of taxes are too high that the business men instead of putting their efforts to earn more, put more efforts to evade taxes with the help of Chartered Accountants (CAs). 

In September 2019, the GDP dropped to 6.3% which was lowest during the decade of 2010 to 2020. Thereafter, the Indian Economy witness the losses from Covid-19 impact and now in December 2020, the Kisan Movement further making the situation worst. 

In such circumstances, India is struggling to prepare for the war with the Pakistan and China to fight with terrorism. Obviously, the currency will further dropped and this time, India requires the support of economists to sit inside the NITI Aayog and frame a chart to boost the economic growth.
Continued.... <<Restricting Demand of Products and Services to contain Inflation is good or bad?>>

*Copyright © 2018 Dr. Lalit Kumar. All rights reserved. 
You might also be interested in reading the following:

1. Duties of a Clerk in Government Departments or Public Sector Entities  2. Social Responsibilities of Business  3. Effective Administration of Accounts - A solution to get rid of Economic Crimes  4. Untold story of IL&FS  5. Purchase Procedures including Government e-Marketplace and Combating Corruption 6. Government Accounting and Audit Mechanisms