- Cryptocurrencies like bitcoin are not legal form of money in India.
Why is in news?
- In his Budget speech, Finance Minister Arun Jaitley for the first time said that cryptocurrencies such as bitcoin are not legal forms of money in India and that the government would take steps to eliminate their use.
- Recently, the governments in China and South Korea also took steps to suppress the use of cryptocurrencies
Why are governments so keen to destroy private cryptocurrencies?
- These currencies pose a significant threat to the massive economic power that national currencies, such as the rupee and dollar, provide their governments.
- Today every country’s government has a legal monopoly over the issuance of the currency that its people use. This means that no entity other than the government may create and sell currencies.
- The very point of legal tender laws is to ban anything other than the currency issued by the government from being used as a medium of exchange.
Benefits to politicians:
Such government control over money, however, offers politicians enormous benefits.
- A politician wanting to fund populist programmes can gather the funds he requires by creating money out of thin air with the help of the central bank.
- This will lead to price inflation that affects the common man but saves the politicians.
- In this scenario, the rise of cryptocurrencies offers ordinary people the rare opportunity to choose among multiple currencies in the marketplace. In fact, in a currency market free from government intervention, any private entity would be free to issue its own currency with the hope that it would soon become a hit with customers.