clear understanding on ( a ) what precisely is a cryptocurrency, ( b ) what useful economic role does a cryptocurrency play, and ( c ) what, if any, are the risks it poses to the society and economy? ( i ) what precisely is a cryptocurrency? 11. a cryptocurrency is designed to be a currency, but does it really function like a currency as we understand it. firstly, currency always has an issuer, usually a trusted entity like the sovereign. even when gold is used as a currency, the gold coins had to be issued by a sovereign entity. secondly, historically, a currency has always been either a commodity with intrinsic value or a debt instrument. cryptocurrencies do not conform to this understanding of a currency as they do not have an issuer, they are not an instrument of debt, or commodities nor do they have any intrinsic value. currency needs trust, not everything that can be trusted is a currency. so even if technology ( as in a blockchain ) provides the trust for cryptocurrencies, they can at best perform the the source for this information is https : / / coinmarketcap. com as on 09 february 2022. role of a currency within the private and closed environment of that cryptocurrency. they do not, and should not, automatically become a currency for the larger society. 12. some countries tend to treat cryptocurrencies as a financial asset. this is also problematic because all financial assets have underlying cash flows and need to be some person ’ s liability. cryptocurrencies are neither any person ’ s liability nor do they have any underlying cash flows. they are not financial assets, by definition. 13. there is also an effort to treat cryptocurrencies as a commodity. but commodities are tangible and have utility ; cryptocurrencies have neither. there is this somewhat awkward attempt to equate some of them with gold, hence limiting their supply like natural resources, or creating them through mining. limiting supply by design is not the same thing as limited supply in nature ( like gold ) because ( a ) design can always be modified and hence such limitation is artificial, and ( b ) even if one cryptocurrency has limited supply, that limitation does not work for all cryptocurrencies taken together. further the fact that gold is mined does not in itself

cryptocurrencies – an assessment 1 shri goel, chairman iba, shri mehta, chief executive iba, prof phatak, chairman of awards jury, members of the jury, mds and ceos and other senior functionaries of banks, ladies and gentlemen let me begin by congratulating the winners of the iba banking technology awards. it is indeed a privilege to be among so august an audience and so learned a gathering and be able to talk about an issue of momentous significance – how to deal with cryptocurrencies. crypto technology and web 3. 0 is dominating the mind - space not just among the technology community but the financial industry as well. cryptocurrencies, as per their proponents, have the potential to play a critical role in how finance pans out in the future ; indeed, there is open speculation about whether finance as we know it and banking as we know it can survive the rise of cryptocurrencies. in this talk i will try and give you my assessment of cryptocurrencies and what they mean for our financial system. introduction 2. as many of you would already know, cryptocurrencies and other crypto products ( like non - fungible tokens or nfts ) are being hailed as the innovations that would usher in decentralized finance or defi, which are blockchain applications geared to disrupt the traditional financial system. the basic purpose of blockchain, or more generally the distributed ledger, the technology on which these crypto - products run, is to make financial intermediation, and therefore banks, redundant. 3. what might have escaped the attention of the common man, is that cryptos might be more than just a technology, they appear to embody an ideology as well. a financial times video characterizes the success of bitcoin, the first and most popular cryptocurrency, to “ healthy dissent, base greed, lofty idealism, and sheer fear of missing out ” 2. the same ft video also says “ cryptos embody a core tenet of anarchism, co - operation in the absence of centralised authority ”. the class of crypto products are fundamentally designed to bypass the established financial system, and on a larger scale government itself. some enthusiasts even claim that cryptocurrencies can usher in a separation of money and state, like separation of church and state. some refer to it