The Global Community started showing interest in virtual currencies, like Bitcoin, in 2021. The supply of this currency is controlled by people, having a sound knowledge of Mathematics, Computer Science, and related expertise. A State cannot control the Cryptocurrency in the same way it controls the legal currency.

Of course, a State can consider a special cryptocurrency, along with its own currency, as legal currency. Belarus has already made an announcement in this regard. In that case, cryptocurrencies can also be used to make purchases, bank savings, stock exchanges, and other transactions. Before that, the State would have to fix the price of the respective cryptocurrencies in terms of its legal currency. For example, the total amount in Indian currency is 100 Rupees, and the Government adds another INR 150 for a cryptocurrency. Such a move would certainly increase the supply of cash in the domestic market. However, production would not increase overnight because of this increased supply of cash. The supply of everything, like paddy, rice, milk, fruit, iron, software, hardware, would be as it was before, especially in the short term. As a result, the increased supply of cash may well trigger a hike in the prices of those products.

Interestingly, a section of economists has welcomed the introduction of the cryptocurrency. They are of the opinion that people would purchase more, if they have extra money. They have argued that products, which have not been sold, will be sold, and unemployed will get jobs. They have further argued that with an increase in demand, the production, too, will increase, and prices will decrease. According to those economists, it will ultimately boost the Economy.

However, there is a political issue. When a country faces an economic crisis, the Government usually lowers interest rates, and increases money supply in order to boost the economy. However, the Government would not take that path, if the cryptocurrency gains legal status, and people may start to lose trust in the country’s currency. It would also disrupt the control of the Central Bank over the economy. Even if the Legislature could keep the country’s overall cryptocurrency supply unchanged, the control over monetary policy could be severely hampered. The Government has a special role to play in the welfare of the people, in relieving the people in crisis periods, and in guiding the National Economy. If a monetary system, not controlled by the Government, becomes an important part of the National Economy, then the independent monetary policy of the country could be in jeopardy.

It is seemingly difficult to determine the exchange rate of money and cryptocurrency, especially in India. The value of the cryptocurrency (in relation with a country’s official currency) will depend on its supply, and demand in the Global Market. If people prefer virtual currency, then the official currency of a country will be in trouble. Hence, the Government should be prepared to address these issues. It is a fact that commodity trading, money transactions, etc., through various virtual platforms help accelerate the National Economy. However, it is difficult to predict whether it would increase the National Income, generate Employment, and control Inflation. No authentic document has yet been made in this regard. If the Government wants to ensure Economic Growth by increasing the supply of cash (for political interests) and by lowering the interest rate, then the cryptocurrency will certainly create trouble.

The supply of cryptocurrency is supposed to be determined by Mathematical Algorithms. However, the supply of cryptocurrency has so far been mathematically self-contained. If a small group shall manage to own the lion’s share of cryptocurrencies in the future, and the virtual currency shall become a popular medium of monetary transactions, then the Global Economy shall naturally become a bit dependent on that group. In the past, a business tycoon had forced Britain to move its Pound-Sterling from a controlled to an uncontrolled currency.

It is almost impossible to control that which is seemingly unreal or not physically existing (virtual), and it is also very difficult to impose any kind of tax on a business, worth millions of Dollars, done virtually. Furthermore, in case of paying higher taxes, the capital, as well as business, finds another area to flourish in a matter of time. The e-commerce shall certainly accelerate business, but shall not allow the Government to increase their earnings, and to spend it for Social Welfare. Hence, it would be a difficult task for the Governments to control the virtual currency. Perhaps, that is why some Governments are planning to create their own virtual currencies to deal with cryptocurrencies.

The positive sides of technological development surely outweigh the negative sides. However, the tendency of hackers to create Anarchy is the reflection of Human Beings’ biological mentality to oppose Institutionalism. In other words, there may well be actions in a subversive manner, trying to nullify conventional issues, in the quest of establishing one’s own identity. Hence, the International Community needs to be careful about crypto-anarchy.

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Published by Koushik Das

Koushik Das (born on May 16, 1976 in Kolkata) is a career journalist. Based in the Indian capital of New Delhi, Koushik writes mainly about foreign policies and current geopolitical issues, and rarely about other topics. His own political ideas are highly influenced by Antonio Gramsci, Louis Althusser, Michel Foucault, Michael Oakeshott and others. English philosopher and political theorist Oakeshott (Dec 11, 1901-Dec 19, 1990) says that “in political activity, men sail a boundless and bottomless sea. There is neither harbour for shelter nor floor for anchorage, neither starting-place, nor appointed destination. But we have to keep afloat”. (Rationalism in Politics, 1962) As a student of Political Science, Koushik loves to share his views on issues, which have great impacts on his thought process (and also on India, South Asia and of course on the global community), with his readers through his website – Boundless Ocean of Politics. By doing so, he tries to keep himself afloat. You will find some of his articles in https://inserbia.info/today/ (https://inserbia.info/today/author/kou_das13_i/), as he has been trying to assess the global geopolitics since 2003. You can also mail him at kousdas@gmail.com View all posts by Koushik Das