Revamp of crypto in its entirety is need of the hour

Though crypto is one of most impactful IT innovations of our times it has no physical form or asset backing and is not issued by a central authority. "The fact that lack of transparency has brought cryptos under heavy criticism needs to be acknowledged in its entirety," says Dr Sujata Seshadrinathan, Director, Basiz Fund Services in an exclusive interview with Bizz Buzz

There is enough scholarly opinion and research evidence to suggest crypto will indeed be the future of currency. As an alternative to cash, it offers solutions to the growing system requirements of business enterprises and user expectations from digital, contactless payment while assuring confidentiality and security. Disintermediation is where transactions can take place directly without the need for a trusted third party like a bank maintaining the integrity of the system. This capability that is built in into the crypto system itself is its biggest advantage as well as the cause for its disruptive effect. The currency of the future may however not be the crypto as we know it in its current form

Governments world over will have to regulate the crypto along with a passing necessary legislations for digital currencies. All regulatory requirements for legal tender as well as investment asset class, like taxation for instance, need to be implemented for crypto as well. Lack of transparency which makes its valuation a matter of pure speculation at present, will be addressed through this. Until then governments need to constantly monitor all sources for misleading information and place them under scrutiny

What is the potential and impact of cryptocurrency on the way business is transacted?

Cryptocurrency or crypto offers the benefit of completely digital, real-time transactions. Money transfers are secure and recorded on a distributed transaction ledger. Blockchain technology on which cryptos are run is the first successful implementation of the triple entry book-keeping system. This means enhanced transparency, in-built audit trail and elimination of the need for reconciliation. All these bring significant advantages to businesses including streamlining of transactions, growth in volume, controlled costs, enhanced security and elimination of intermediaries. With transaction processing getting simplified, usage of crypto will also release capacity for focus on core business capabilities and building a competitive edge.

Can crypto be regarded as the future of currency?

Crypto exists only digitally or virtually while its transactions are cryptographically secured with no central authority issuing or regulating it. New units are issued and transactions are recorded on a decentralized system, after being verified by consensus mechanisms. This makes crypto a 'trustless' disintermediated currency system. There is enough scholarly opinion and research evidence to suggest crypto will indeed be the future of currency. As an alternative to cash, it offers solutions to the growing system requirements of business enterprises and user expectations from digital, contactless payment while assuring confidentiality and security. Disintermediation is where transactions can take place directly without the need for a trusted third party like a bank maintaining the integrity of the system. This capability that is built in into the crypto system itself is its biggest advantage as well as the cause for its disruptive effect. The currency of the future may however not be the crypto as we know it in its current form.

Why and how regulation will ensure harnessing the power of crypto?

Though crypto is one of most impactful IT innovations of our times it has no physical form or asset backing and is not issued by a central authority. The lack of regulatory monitoring and control makes crypto currency as well as its exchanges prone to irregularities. These include money laundering, insider trading and such other malpractices. The fact that lack of transparency has brought cryptos under heavy criticism needs to be acknowledged in its entirety. For instance, the source of funds invested into it and the identity of the investor both do not need any disclosures. For cryptos' full potential to be realised the first step is therefore for it be regulated as legal tender. Once regulated most of its shortcomings including possibility of illegal usage can be brought under control.

What effort needs to be taken to curb challenges such as dissemination of misleading information as well as address issues of money laundering, protect customer interest?

The nature of issues concerning cryptocurrencies makes government intervention and regulation the only way out. A revamp of the crypto in its entirety is the need of the hour. Acknowledging the existence of many grey areas in the digital currency zone and then dealing with each individually is the first step towards resolving the situation. Governments world over will have to regulate the crypto along with a passing necessary legislations for digital currencies. All regulatory requirements for legal tender as well as investment asset class, like taxation for instance, need to be implemented for crypto as well. Lack of transparency which makes its valuation a matter of pure speculation at present, will be addressed through this. Until then governments need to constantly monitor all sources for misleading information and place them under scrutiny. In the absence of knowledge and necessary disclosures, people believe in misleading information. This can also be brought under control once it is regulated.

How crypto bill will regulate the market?

Government of India (GOI) has been thorough in its study of the crypto scenario. Deep study of the asset class and all its inherent issues have been reportedly undertaken by RBI, Finance and Home ministry in consultation with Indian as well as global experts. The initial meetings of GOI with leading players in the crypto arena in India have reported their resistance to being regulated by the established regulators like RBI and SEBI. It is then expected that the Crypto Bill in India may continue the ban crypto in its current form with certain exceptions required for the underlying technology of blockchain. This could be in cases where the currency required for running program code on blockchain for instance the Ether for Ethereum. Some surveys report Indians being aware of but distrusting the crypto while recommending that the RBI issue its own digital currency. FM Smt Nirmala Seetharamanji has communicated the stand of GOI towards continuing the ban on crypto while allowing crypto assets. A crypto currency issued and monitored by the RBI and other regulators as well as a legal framework for it are expected to be presented in the crypto bill.

What is the GOI's stand on blockchain as a technology for the future?

Distributed Ledger Technology (DLT) as implemented in Blockchain is a distributed database of records. It is an immutable public ledger of all transactions or digital events that have been executed and shared among participating parties. The key features of blockchain include immutability, security, trust, speedy transactions and mitigation of risk and frauds. Blockchain technology has been heralded as the biggest IT innovation after the internet.

GOIs diligent and in depth understanding of the issue is evident in the clear stand it has taken with regards to the 3 distinct aspects of the it - existing cryptos and crypto assets, issuing a federally regulated cryptocurrency and policy towards the underlying technology of blockchain as being distinct from crypto. A centre of excellence has been established under the preview of the NIC towards this. Called the CoEBCT, their purpose is clearly stated as promotion of blockchain technologies and facilitating the rapid adaptation and on-boarding of blockchain based solutions. GOI has recognised possibilities of the technology with its inherent ability to foster trust and greater transparency in transactions. In addition to this Central as well as several state governments are actively exploring apt use cases for blockchain adoption. This positive stand of GOI is also very critical for the IT sector where India is a leading service and solution provider to the world.