Virtual Currencies Vs Crypto Currencies
Recently Supreme Court set aside a ban by the Reserve Bank of India on banks and financial institutions from dealing with virtual currency holders and exchanges.
About
• The court held that the ban did not pass the “proportionality” test.
• The test of proportionality of any action by the government, the court held, must pass the test of Article
19(1)(g), which states that all citizens of the country will have the right to practice any profession, or
carry on any occupation or trade and business.
• In a circular in 2018, the RBI had banned banks from dealing with virtual currency exchanges
and individual holders on the grounds that these currencies had no underlying fiat and that it was
necessary in the larger public interest to stop banks from providing any services related to these.
• There is no globally accepted definition of what exactly is virtual currency.
• Some agencies have called it a method of exchange of value; others have labelled it a goods item,
product or commodity.
• The underlying technology of virtual currencies are called blockchain, defined bitcoins as “a new electronic
cash system that’s fully peer-to-peer, with no trusted third party”.
4. Virtual Currency4 | P a g e
• This essentially meant there would be no central regulator for virtual currencies as they would be
placed in a globally visible ledger, accessible to all the users of the technology.
• All users of such virtual currencies would be able to see and keep track of the transactions taking
place.
Virtual Currencies Vs Crypto Currencies
• Virtual currency is the larger umbrella term for all forms of non-fiat currency being traded online.
• Virtual currencies are mostly created, distributed and accepted in local virtual networks.
• Cryptocurrencies, on the other hand, have an extra layer of security, in the form of encryption
algorithms.
• Cryptographic methods are used to make the currency as well as the network on which they are being
traded, secure.
• Most cryptocurrencies now operate on the block chain or distributed ledger technology, which allows
everyone on the network to keep track of the transactions occurring globally.
• Organizations across the globe have called for caution while dealing with virtual currencies, while
also warning that a blanket ban of any sort could push the entire system underground, which in turn would mean no regulation.