Crypto currency, current status in India and discussion.

 Crypto currency, current status in India and discussion.

Indian rupee is still not fully convertible. It is governed under FEMA and is exchangable in a controlled manner. Reserve bank of India has still not accepted crypto currency as a valid currency. Famous Indian lawyer shri Nishit Desai and associates is fighting with RBI and Finance ministry on behalf of some crypto currencies for same. RBI has mentioned in the supreme court that it is not going to ban crypto currencies. 

Nishit Desai says that don't consider crypto currency as currency but treat it as a new type of  asset which can be bartered. Any way the concept of currency is also coming from barter system. So what is wrong with crypto currency? 

Crypto currency is not like any other fixed or liquid asset, but it is a virtual asset on internet. Its rate changes frequently.  Trading or any other type of exchange is only its commercial aspect, but it is totally virtual. The question is whether such virtual asset exists?

Suppose somebody creates a virtual company and starts selling its shares virtually on capital markets, are we going to invest in a company which does not have any real plant and machinery, no production or services, no real assets either fixed or liquid? If some small number of people invests in that equity or asset and enjoy themselves then it is their choice.

Offcourse, number of such crypto currencies is increasing. Its usage and exchange is also increasing day by day accross continents. Though it is surprising, it is truth.

 

Now let us think on this thouroughly.

The present world economy is based on old school of thoughts which is based on consideration of all kinds of real assets, gold, commodities, land, real estate, live stock, GDP etc. of a country. The economy of every country is measured on these aspects and is reflected proportionately on its currency value such as rupee, dolar etc.

Let us consider this as a big world game to evaluate value of each existing currencies. Its rules and regulations are accepted by allmost all nations and is also loosely monitored by world currency markets. Countries trade with each other based on these rules and regulations.

Now an alternative system of currencies ( you can say another new game) has come up called crypto currencies. It is not idenentical to old system but is parralel to old system.

That is called crypto currency. It also has its own rules, regulations and processes to create, exchange or distribute among its holders. There is a fixed quota of such currency available in market. Its valuation depends on demand, supply or spread.

There are more than 4000 crypto currencies available in market and its combined market cap is 2.3 trilion dollars as of January 2021. There is no ban on creating a new crypto currency. One whose demand and spread is more commands more value. There is no intrensic value of any crypto currency.

So this game is parallel to present world economical game mentioned above and is trying to enter into this system. Whether to accept this new player in our old game is our choice. RBI has not given clear direction in this regard.  It will be interesting to see how this new player adjust itself with old players without having any intrinsic value. Yes, we accept that it is following its own rules and regulations strictly, transparently and with high level of technology innovation called bitcoin where chances of frauds and abrupt interuptions are almost nil.

Economists with old school of thoughts have surrender themselves against the invasion of this player due to its demand world over.

 

Madhav Bhole