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While some countries like El Salvador saw this as an opportunity to improve their financial system and fully embrace the revolution, others like China have declared a blanket ban on cryptocurrencies. In an interesting turn of events, India, the country with millions of crypto holders, recently imposed a 30% tax on crypto income, and revealed plans to introduce its own digital currency. The country is still waiting for the official digital currency bill which should clarify its position on cryptocurrencies.
While taxation is a step in the right direction for the future of crypto in India, the looming bill could antagonize private cryptocurrencies in the country, and that’s a bigger problem than many don’t. want to admit it.
What is the bill exactly?
The Cryptocurrency Bill and Official Digital Currency Regulation, in its current form, seeks to ban all “private cryptocurrencies” as a method of payment in India, except for a few for the development of the underlying technology. The original plan was to introduce this bill in India’s winter parliamentary session in 2022. However, considering the impact this bill could have on investors and financial markets as a whole , the Indian government has taken a step back to reassess its stance on cryptocurrencies. The problem, however, lies in the use of the term “private cryptocurrencies”.
When news of this impending bill broke on November 23 last year, people were quick to speculate about the meaning of the term “private rooms”, and many of them came to the conclusion they were private rooms. Quick exchange Founder Sameep Singhania also found this bill to be different from the 2019 bill and said, “Our finance minister on several occasions has said that the government will support blockchain and crypto innovation that is happening. produced all over the country. This time, they specifically put a “private crypto” ban in the bill. »
Now, there is still visible confusion over what exactly the government means by “private crypto”. But, if the speculations are true, banning privacy coins like Monero, Zcash, and Dash might not be the right move for the future of the crypto industry.
What are privacy coins in cryptocurrency?
One of the signature characteristics of cryptocurrencies is transparency. The underlying cryptocurrency blockchain networks are public ledgers and anyone can get a full record of all transactions made on the network. For example, if X sends 10 ETH to Y, that transaction is permanently recorded on the blockchain using their wallet addresses. This makes the network pseudonymous and anyone who knows X’s wallet address can see a complete record of every transaction made on the Ethereum network.
It doesn’t take a genius to figure out the flaw in the plan here. The lack of user privacy on blockchain networks started to become fully evident as the number of users started to increase. This is precisely why privacy coins were created. Using technologies like evidence without knowledge and zk-SNARKS, these coins created a way to protect user privacy when transacting on blockchain networks. Naturally, this has raised concerns about the use of this technology for criminal activities like money laundering and this could be the reason why the Indian government may see fit to ban these coins. However, when you look beyond the surface, these coins could be very important for the growth of the crypto industry.
The Benefits of Privacy in Cryptocurrency Outweigh the Risks
Nowadays, users are more concerned about privacy than anything else, and when it comes to crucial information like financial transactions, that concern multiplies. This is why private cryptocurrencies are very important to protect and safeguard user interest in the decentralized world. They ensure that sensitive user data is not accessible to just anyone and create a secure space for transactions. Some privacy coins like Zcash and Hyphen offer users the option of whether or not to protect their transactions, giving them ultimate control over their data. This kind of trust could attract more users to the crypto revolution.
Additionally, as cryptocurrencies continue to become mainstream and their adoption increases, these coins can be used to protect the privacy of organizations and businesses. They allow companies to sign agreements using smart contracts on the blockchain, while all financial transactions between them are well protected. The use cases are virtually endless.
Additionally, several reports have shown that less than 1% of crypto transactions account of criminal activity and cash remains the tool of convenience for criminals. Given all these positive aspects of privacy coins, banning them altogether could pose a threat to user privacy and ultimately the underlying technology.
Hope for the best
Like any other innovation ever created in the history of mankind, private coins might have some downsides. But ultimately, their benefits outweigh the risks. While the Indian government’s final decision is still awaited, we hope that the government will keep in mind the interests and privacy concerns of all users.
Sameep Singhania is co-founder and lead developer at QuickSwap.
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