Q.4 Virtual Currency and Crypto Currency Ban by RBI: A virtual currency is a form of digital currency that operates independently of traditional banking systems. It’s used for online transactions and is often based on blockchain technology. Cryptocurrency is a subset of virtual currency that employs cryptographic techniques for secure transactions and to control the creation of new units. Key features of virtual currencies include decentralization, security through cryptography, and transparency.

The Reserve Bank of India (RBI) banned cryptocurrency trading and transactions in 2018 due to concerns about several factors:

  1. Lack of Regulation: Cryptocurrencies operate in a largely unregulated space, raising concerns about illegal activities such as money laundering and fraud.
  2. Investor Protection: The highly volatile nature of cryptocurrencies poses risks to investors, who might suffer significant losses due to sudden price fluctuations.
  3. Financial Stability: The decentralized and unregulated nature of cryptocurrencies could potentially impact the stability of the traditional financial system.
  4. Consumer Safety: The lack of regulation could expose consumers to risks, including scams and cyberattacks.
  5. Monetary Policy: Cryptocurrencies are not under the control of central banks, potentially impacting a country’s ability to implement monetary policy effectively.


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