What is Crypto Currency
A cryptocurrency (or crypto currency) is a digital asset designed to work as a medium of exchange using cryptography to secure the transactions, to control the creation of additional units, and to verify the transfer of assets. Cryptocurrencies are classified as a subset of digital currencies and are also classified as a subset of alternative currencies and virtual currencies.
Bitcoin, created in 2009, was the first decentralized cryptocurrency. Since then, numerous cryptocurrencies have been created. These are frequently called altcoins, as a blend of bitcoin alternative. Bitcoin and its derivatives use decentralized control as opposed to centralized electronic money/central banking systems. The decentralized control is related to the use of bitcoin’s blockchain transaction database in the role of a distributed ledger.
What is Demonetisation
Demonetisation is a situation where the Central Bank of the country (Reserve Bank in India) withdraws the old currency notes of certain denomination as an official mode of payment.
On November 8, 2016, Prime Minister Narendra Modi in a surprise announcement said the existing higher denomination currency (Rs 500 and Rs 1000) will cease to be legal tenders. PM said this is government’s biggest push to fight black money and end corruption. The opposition, however, criticised the government for poor implementation of the scheme and said a lot of people have died standing in queues trying to get their hands on the new currency.
Whether Cryptocurrency and Demonetisation related to each other
Cryptocurrency started long back, but growth has seen during demonetisation, and sudden downside by 31t Dec’16, when 500 & 1000 tender notes are not valid in India. As these transactions are not governed by any government, hence unaccounted money is invested in Bitcoin that provides the visibility as another instrument that can be used for under the table dealings. Below mentioned chart from www.coindesk.com explained the relationship
How to Regulate cryptocurrency
Organizations needs to share the transaction details for any transaction. In case user tries to withdraw the money then Bank should block the money and explain the source of investment to be presented to Income Tax before releasing the money.
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