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Smart regulation is preferable for cryptocurrencies as a ban on something that is based on a technology of distributed ledger cannot be implemented for all practical purposes. Critically analyze.

Topic:  Science and Technology- developments and their applications and effects in everyday life.

4. Smart regulation is preferable for cryptocurrencies as a ban on something that is based on a technology of distributed ledger cannot be implemented for all practical purposes. Critically analyze. (250 words).

Reference: The HinduInsights IAS

Why the question:

The government’s statement about bringing in a law on cryptocurrencies is welcome, as it could put an end to the existing ambiguity over the legality of these currencies in India.

Key Demand of the question:

To make a case for the smart regulation of cryptocurrencies than outright ban.

Directive:

Critically analyze – When asked to analyse, you have to examine methodically the structure or nature of the topic by separating it into component parts and present them as a whole in a summary. When ‘critically’ is suffixed or prefixed to a directive, one needs to look at the good and bad of the topic and give a fair judgment.

Structure of the answer:

Introduction:

Define crypto currencies and give the context where it seems the government is inclined on brining a new law to regulate it.

Body:

Cite facts and figures that encompass the good performance of crypto currencies and the benefits it can accrue to the Indian financial sector.

Mention the developments so far in India with respect to crypto currencies: the revocation of banking ban in March 2020. Mention about the possibility of a draft law which the government is considering.

Bring out the potential challenges in implementation of large scale crypto currency based assets. Also, highlight the inadequacies in the Indian financial system pertaining to crypto currencies.

State reasons why India should to be more accepting of crypto currencies and the need to move to regulate the sector than resisting.

Conclusion:

Conclude with balanced way forward.