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NPCI refuses to ban cryptocurrency trades in India:
National Payments Corporation of India (NPCI) has refused to ban cryptocurrency transactions.
- Further, it has put the onus on banks whether to ban transactions of cryptocurrency trades or not. It told banks to take a decision based on the advice of their legal and compliance departments.
What is NPCI?
- The National Payments Corporation of India (NPCI) serves as an umbrella body for the operation of retail payment in India.
- This organization was established by the Reserve Bank of India along with the Indian Bank’s Association under the provisions of the Payment and Settlement Systems Act, 2007.
- Presently, NPCI is promoted by ten major promoter banks.
NPCI can operate the following payment systems:
- National Financial Switch (NFS).
- Immediate Payment System (IMPS).
- Affiliation of RuPay Cards (debit cards/ prepaid cards) issued by banks and co-branded credit cards issued by non-banking financial companies (NBFCs) or any other entity approved by the RBI.
- National Automatic Clearing House (ACH).
- Aadhaar Enabled Payments System (AEPS).
- Operation of Cheque Truncation System.
Products of NPCI:
- National Common Mobility Card.
- Bharat Interface for Money (BHIM).
- Unified Payments Interface (UPI).
- Bharat Bill Payment System.
Why has it refused to ban cryptocurrency trades?
NPCI’s decision is based on the Supreme Court’s March 2020 ruling which set aside a directive by the Reserve Bank of India from April 2018 to ban banks and finance companies for “dealing in virtual currencies or providing services to facilitate” anyone trading in crypto.
- NCPI has not blocked the trades given that the RBI did not come out with any directive following the Supreme Court ruling.
What is a cryptocurrency?
Cryptocurrencies are digital currencies in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank.
It works on blockchain technology.
Examples: Bitcoin, Ethereum etc.
Why is it in demand?
- Funds transfer between two parties will be easy without the need of third party like credit/debit cards or banks.
- It is a cheaper alternative compared to other online transactions.
- Payments are safe and secured and offer an unprecedented level of anonymity.
- Modern cryptocurrency systems come with a user “wallet” or account address which is accessible only by a public key and pirate key.
- The private key is only know to the owner of the wallet.
- Funds transfer are completed with minimal processing fees.
- The almost hidden nature of cryptocurrency transactions makes them easy to be the focus of illegal activities such as money laundering, tax-evasion and possibly even terror-financing.
- Payments are not irreversible.
- Cryptocurrencies are not accepted everywhere and have limited value elsewhere
- There is concern that cryptocurrencies like Bitcoin are not rooted in any material goods. Some research, however, has identified that the cost of producing a Bitcoin, which requires an increasingly large amount of energy, is directly related to its market price.
- Various cryptocurrencies.
- Cryptocurrencies launched by various countries.
- What is Blockchain technology?
- About NPCI.
What are Cryptocurrencies? Why is there a need for regulation? Discuss.
Sources: Indian Express.