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TThe Cryptocurrency and Official Digital Currency Regulation Bill, 2021, which is expected to be presented to the Lok Sabha during the next winter session of Parliament from November 29, will mark the end of the private agreements of cryptocurrency in India and will introduce a regulatory framework in this sector. The official digital currency that will be introduced by the Reserve Bank of India will be recognized and will in all likelihood be the official cryptocurrency of the country.

The broad consensus seems to be that it would be prudent for Narendra Modi’s government to regulate this activity rather than ban it altogether. It is feared that around 10 million Indians who own or sell cryptocurrency will continue to touch it despite the ban, making it the largest illegal financial trade on the underground black market in decades. The stock market will pale into insignificance.

The worst fear of any online trading activity and agency, whether private or public, is the possibility of a cyber attack. According to the Indian Computer Emergency Response Team (CERT-In), there have been more than six thousand computer security breaches in the first six months of this year, with government institutions accounting for 12,000 incidents. Malware originating in Pakistan that previously targeted the power industry and government organizations in India has now mutated, like an actual virus, to adopt new cyberattack capabilities.

The modified remote access Trojan, dubbed “ReverseRat 2.0,” has “additional features such as taking photos remotely via webcams and recovering files from USB devices inserted into compromised machines,” according to the Back Lotus Labs report. According to reports, Afghanistan, India, Iran and Jordan were among the governments targeted by attackers using a forged United Nations meeting platform (UNODC) to attract government targets.

For example Quoine Pte Ltd, which operates under the Liquid brand, is exempted by the Monetary Authority of Singapore (MAS) from being licensed to provide digital payment token (DPT) services and warns customers that they may not not be able to recover all the money or TPD paid to them if the business goes bankrupt. In August of this year, this company was the victim of a cyberattack that resulted in the theft of cryptocurrency assets worth $ 97 million from its warm wallets (an online account used by customers for access easy for cryptocurrency trading).

A cyberattack on government-run or licensed computer exchanges will seriously erode investor confidence, even in other markets trading financial instruments. The regulator must isolate all such financial exchanges and markets from such an eventuality.

Read also : Modi’s government plans to allow crypto trading for some investors

Not just another business activity

Cryptocurrencies arose from the idea of ​​”mining” bitcoins using a complicated algorithm and high-end computers with multiple functions working in parallel. Soon the blockchain technique became more popular than the end product. The biggest advantage of this technique was the ease with which the trader could conceal all private information. This in itself becomes the source of many illegal, shady and anti-national activities. The attempt to regulate by the government seems to be the right way to prevent the misuse of the technology but to derive the maximum benefit from it. Like any other “legally licensed gambling business,” this government-issued cryptocurrency business will also generate enough tax-worthy profits. These tax revenues could be one of the incentives for the government to allow this restricted trade rather than banning it and losing the “sin tax”.

Cryptocurrencies are not just another business activity. They have the potential to turn into a deadly weapon in the wrong hands with sinister motives. Trading in weapons and weapons, including medium-range nuclear warheads, is possible with cryptocurrencies without going through openly traceable computer operations that are easy to track.

In order to prevent transaction tracing and protect customer privacy, cryptocurrency platforms use various techniques such as Dual Key Stealth Address Protocol (DKSAP), which allows the sender to generate a new address. for each new transaction. By using the ring user signature technique, the sender can make the transaction completely untraceable. Such multiple transactions can come from one source but reach different buyers or beneficiaries without anyone in the ring knowing the other, let alone the security agencies. Finally, the succinct non-interactive Zero Knowledge argument (Zk-SNARKs or Snark as it is called) designed to conceal the account balance allows the currency holder to authenticate and validate a transaction without disclosing information. critical personal or even localization.

New government regulations should seriously consider imposing technological mechanisms so that every cryptocurrency transaction, such as trading in the stock market, is traceable and subject to review and audit. The idea behind such a mechanism should be to prevent cryptocurrency deals from being turned into a tool that could compromise national security.

This does not mean that the user should cede their personal information or compromise its confidentiality for the sake of net profit. Like any other financial instrument, cryptocurrency should also have all the characteristics of ensuring the protection of information of a confidential nature but allowing authorities to detect fraud, concealment of income, misuse with anti-national intent or a security breach.

Government regulation may require further corrections over a period of time, but it is certainly a good start, which will test both the sincerity of the market and the prudence of the government.

The author is the former editor of ‘Organizer’. He tweets @seshadrichari. Opinions are personal.

(Edited by Prashant)

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