India to adopt digital rupee and slap a 30 per cent tax on cryptocurrency income India's government has ordered its Reserve Bank to have a digital rupee into circulation by next year, and outlined plans to raise revenue with a 30 per cent income tax on cryptocurrency and non-fungible tokens. The two plans were announced yesterday by finance minister Nirmala Sitharaman as she revealed the nation's budget …
during a long term power fluxuation that lasts longer than your UPS?
Because unless your digital wallet includes a battery with a week-long useable lifespan (duration between recharges), then how do you keep digital cash from going poof when the power grid crashes?
At least with physical cash it doesn't require power to maintain, a feature that makes it more long term climate friendly.
Or are they less concerned with climate change than proving to the world that they've got more pressing issues to think about?
You could say the same thing of any electronic payment system. Credit cards don't work any better than cryptocurrency or non-cryptographic digital currency like this if the systems are all down. You could deal with this by only using physical currency, which would work, but most countries are not going that way in policy or in practice. The method most have decided to use is trying not to have any week-long blackouts and panicking if they get one.
At DoubleLayer. Your ATM card is only there to allow you access to the funds you have in your bank account. If the power goes out & you can't use an ATM, you can still go manually visit the bank, walk up to a teller, and pull your money.
Your credit card is normally used in a purely electronic form (EG: swiping at a terminal to pay for stuff) but can also be run through a manual card imprinter, a physical receipt made, & copies kept by both customer & merchant to later prove of the transaction.
But how can you do any of that if your funds only exist in an electronic form that can't be used/generated/maintained without power to the infrastructure?
Physical cash can be used even during a power outage. Credit cards can be manually imprinted to create a physical record of any intended transaction. But crypto currencies can't be used at all if both the customer & merchant don't have power to the various devices (SmartPhone, cash register, etc) & infrastructure (cell network, ISP, online digital wallet, etc) through which such a transaction requires to become official.
This is the crux of the problem as I envision it. How do you enable the use of crypto currencies during an extended power outage?
This assumes that we will all operate as we did before electronic payments become common, but we probably won't. Some of your reasoning no longer applies.
"If the power goes out & you can't use an ATM, you can still go manually visit the bank, walk up to a teller, and pull your money."
You can, but only if the bank knows how much money you have. Nowadays, they use computers for that, because if they kept it on paper, you could go to each branch you can get to, withdraw all your money, then leg it with a multiple of your savings before they exchange ledgers. You could change things so that you only have one bank with your money in it and you must go there to get it, but people like the convenience of not being restricted to one place. If there's a blackout, banks continue to use backup power for their communications and computing. If you manage to black them out for long enough that they can't, they'll likely delay teller service until they have something they can rely on.
"Your credit card is normally used in a purely electronic form (EG: swiping at a terminal to pay for stuff) but can also be run through a manual card imprinter, a physical receipt made, & copies kept by both customer & merchant to later prove of the transaction."
Not necessarily, as they have been changing the design of the cards to make it harder. It also lacks many of the security features that physical card use tends to have. I'll concede it's an option, but as I say below, it's an option with cryptocurrency as well.
"But how can you do any of that if your funds only exist in an electronic form that can't be used/generated/maintained without power to the infrastructure?"
You can't, as I said. I'm not a cryptocurrency supporter here. I'm just pointing out that the level of damage you would need to make it stop working is severe, and that similarly severe damage to other systems would have similarly destructive effects on most payment methods other than cash.
"But crypto currencies can't be used at all if both the customer & merchant don't have power to the various devices (SmartPhone, cash register, etc) & infrastructure (cell network, ISP, online digital wallet, etc) through which such a transaction requires to become official."
This is not the case, really. It would work like a credit card would. If you copy the card for use in the transaction, you keep the details until the power comes back and then transmit them to the card provider. The customer could similarly sign their payment and you could copy that. The only device that needs to be powered during the transaction is the customer's wallet device (possibly a phone). If you use a dedicated device, it's likely to last quite a long time on a battery as it won't have radios draining the battery. You can recharge it in a number of ways. In both cases, however, it's possible that what you copied at the time either was fake then or has become invalid by the time you send it off, which is why most places don't accept card payments when the machine is down.
To the AC, re: the wallet.
But how do you engage in transactions using a digital currency if there's no power? You may have your wallet on a USB stick, but that does little good if the coffee shop doesn't have power, the bank doesn't have power, or your SmartPhone battery has been dead from lack of an ability to charge it, etc etc etc.
How do you engage in commerce with a digital currency if there's no power with which to generate the currency, exchange the currency, or update the blockchain behind it all?
> But how do you engage in transactions using a digital currency if there's no power? You may have your wallet on a USB stick, but that does little good if the coffee shop doesn't have power, the bank doesn't have power, or your SmartPhone battery has been dead from lack of an ability to charge it, etc etc etc.
To be fair, the same issue applies with any digital payment.
I was recently in Argentina with my housemate who was dealing with some family stuff. And it was hot, since it's their summer.
As in 45-50c hot.
As a result, when we were getting ready at their family house to return back to the UK, there was a power-cut, since everyone was running their aircon at max.
Which was a bit of a problem, since we needed to summon a taxi to get to the airport. I don't know if the Argentinian phone network stays up during a power cut, but it's something of a moot point, since there wasn't any power for the house's router.
No router, no wifi.
Thankfully, the mobile phone network was still up, and I'd bought a local sim card with enough data left on it to summon a Uber.
(Perhaps ironically, unlike my housemate, who'd decided against doing similar "since we can just use wifi everywhere"!)
It was certainly a useful reminder of how so many things are now dependent on access to the internet, and how disruptive it can be if anything happens to block said access.
Oh, and we paid the Uber in cash, since that's how they roll over there :)
I wish they would STOP calling it "cryptocurrency". It isn't a "currency" at all, it is a digital asset, as Bloomberg as started to call it.. You trade it for a value against something else, if you want, but a lot of people hold on to it as an investment that will hopefully appreciate over time.
News flash: a currency is not a device that you invest onto itself hoping that it appreciates. A currency is only a token that has value when it is used towards another goal: either trade it, or invest it in hopes that the investment increases in value or offers a return on that investment (interest). You can't invest in a dollar, hold it under a mattress or a "wallet", and expect somehow to have TWO dollars next month. It doesn't work like that - the only process that trades in the actual value of the currency itself is arbitrage, and then it only uses the exchange values between currency markets to return a profit.
"Digital asset". If you want to exchange it, in lieu of currency to those who are willing to accept that trade, then that works. But "currency" does not, and never WILL have, an intrinsic value that increases just by existing.
"currency does not, and never WILL have, an intrinsic value that increases just by existing."
Nothing does. It only increases in value due to the change in exchange value. And during a deflationary environment, people did hold currency for its increase in value. That's why we don't do the gold standard anymore, because deflation caused some problems.
I agree that cryptocurrency isn't currency, but not for the reasons you state. People invest in currency all the time to play with the various exchanges. Most cryptocurrencies fail at one or more of the purposes of currency, usually the ability to make exchanges feasibly (without massive delays or additional fees at the scale of an average personal transaction).
Also, both points are irrelevant about this attempt, which is fixed to the value of a rupee, which is a currency. I think this digital rupee is a bad idea for a bunch of reasons, but it certainly would be a currency.
A nationwide digital currency does not need blockchain, and blockchain is only going to ensure that it will fail.
India can perfectly well invent itself a digital currency if it wants, although it could also very well create its own version of VISA with certified banks participating and its roupee would go full digital at the press of a button (ok, slight exaggeration there).
Money is already digital. 99% of my transactions are bonking my credit card on a contactless reader or, for paying bills, an IBAN transfer. I haven't used actual bills and coins since 2019.
So why this blind adoration of blockchain ? It doesn't bring anything banks are not supposed to handle, it does not scale, and if I have to lug around a terabyte of ledger data to buy a loaf of bread, it is insane.
Please explain this insanity to me.
You don't lug anything around with you. Other than the digital certificate used to authenticate transactions from your digital wallet.
Currently when you pay for something by bonking, as you say, your card, a request for funds is sent, the funds are reserved, and moved at some point later in the day. Or after any inconvenient weekends/holidays/etc. Banks take the piss when it comes to moving money in and out of your account. (It's usually removed as quickly as possible, and inserted as late as possible to maximise interest payments in their favour. I don't know about banks in other countries, but in Norway it takes a minimum of one working day to move numbers from the database row that represents my main account to the database row that represents my mortgage account. That's one day of interest lost to my main account, and one extra day of interest added to my mortgage. It has to be one of the biggest scams going.) With a blockchain based digital currency, transfers happen at the speed of the network, not when the bank deems it.
International transfers using SWIFT are incredibly slow and expensive. How long does it take for money to be cleared? Three to five days at least, from what I remember. Why? Even carrier pigeons are faster sometimes.
Pascal: I don't really understand blockchain well enough to evaluate it. But based on the long history of complaints of processing delays and the high transaction costs we're told are associated with cryptocurrency transactions, I think it likely there really are problems.
I think for a digital currency to work, it has to have VERY low transaction costs in addition to being convenient and secure. I don't think India or anyone else knows how to do any of those things, much less all of them simultaneously.
As for blockchain, crypto, NFT. The whole thing reminds me a lot of the Albanian pyramid schemes of three decades ago that managed to pretty much demolish the economy of what was (and remains) one of the most primitive and undeveloped countries in Europe. https://www.imf.org/external/pubs/ft/fandd/2000/03/jarvis.htm
A bad idea dubiously well implemented.
Bitcoin has the lightning network which can process transactions instantly for less than a cent whereas the main Bitcoin protocol can take 10 mins and cost varies. Therefore I don't see why a central bank digital currency would cost more than other methods; and probably much cheaper than VISA. They don't require a blockchain either although blockchain technology might give more resilience. An IT failure with a centralised system is not unimaginable.
https://www.rupay.co.in/ They already ave their own card and payment processing system very similar to VISA/Mastercard. It even has very low transaction rates.
https://www.bhimupi.org.in/ They also have direct bank account to bank account transaction processing using Virtual Paymnet address (VPA) or commonly known as UPI ID. It can be your mobile number, or whatever you want. It is free and payments are executed within seconds.
They do not need to wait 3-7 days for simple ACH/wire transfers, 5 days for SEPA transfers or some other stupid stuff like this.
"Nigeria and the Bahamas currently offer their currencies in digital form"
As do pretty much every other country in the world. How exactly do you think an online bank transfer works? Or a contactless payment, whether using a card or a phone? Digital has absolutely nothing to do with blockchain. The vast majority of currencies have been digital for years, but happen to allow legacy physical money to interact with the digital system.
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