By Sagnik Majumder

https://youtu.be/1jWqAHhzZhM

In the dynamic world of finance, cryptocurrencies have emerged as a significant innovation, challenging the conventional monetary systems. These digital or virtual currencies, built on advanced cryptographic technology, operate independently of traditional central banking systems.

The global adoption of cryptocurrencies has escalated, particularly during the COVID-19 pandemic, marking an important shift in financial transactions and investments. In countries like India, where there is yet no regulation for cryptocurrencies, the diverse range of public engagement and interest in these digital assets is noteworthy.

Purushottam Anand, an advocate and founder of Crypto Legal, emphasises the intrinsic value of cryptocurrencies. “Cryptocurrencies are not primarily intended as investment tools. Their value is derived from the underlying blockchain technology,” Anand explains. He further clarifies how the demand and supply mechanisms of cryptocurrencies are inherently linked to the blockchain’s utility. “As more people use or interact with a specific blockchain, the demand for its native cryptocurrency increases, consequently driving up its value.”

However, Rashmi Deshpande, a lawyer and founder of Fountainhead Legal, offers a different perspective. She argues that referring to these digital assets as ‘currencies’ might be misleading. “In most countries, cryptocurrencies haven’t been recognised as official currencies. They are not universally accepted for trade or transactions,” Deshpande points out. She suggests that the term ‘crypto tokens’ might be a more appropriate designation than ‘currency’, highlighting the limited acceptance of cryptocurrencies in global markets.

IMF’s Warning on the Unregulated Cryptocurrency Market

The International Monetary Fund (IMF) has raised alarms about the potential for unregulated cryptocurrencies to foster an alternative financial system. The IMF acknowledges the benefits that these digital currencies might offer, but it also points out the significant risks and costs, especially in developing countries. There is a mounting concern that without regulation, cryptocurrencies could adversely affect national economies over time.

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