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What are private cryptocurrencies?  How they are different from audiences


The Cryptocurrency and Official Digital Currency Regulation Bill, 2021 aims to ban all private cryptocurrencies in India and make way for an official digital currency to be issued by the Reserve Bank of India (RBI ). The bill will be presented to Lok Sabha during the winter session, which is expected to start from November 29.

However, it “will allow certain exceptions to promote the underlying cryptocurrency technology and its uses … It also seeks to create a framework facilitating the creation of the official digital currency to be issued by the Reserve Bank of India.” , says the Lok Sabha newsletter.

The government has yet to clarify the definition of private cryptocurrencies. Currently, the popular opinion is that Bitcoin, Ether, and several other crypto tokens based on public blockchain networks will continue to be used.

Meanwhile, cryptocurrencies like Monero, Dash and others that obscure transaction information to provide privacy to users can be classified as private tokens and therefore are subject to ban.

Difference between private and public cryptocurrencies

The most famous cryptocurrencies like Bitcoin, Ether, Dogecoin, Shiba Inu and others are public because their transactions are completely transparent. Although these cryptocurrencies offer a certain degree of anonymity to users as they allow them to operate under pseudonyms, all transactions on the blockchain can be viewed by anyone with access to said blockchain.

By design, the transactions of these cryptocurrencies are linked and traceable. Therefore, organizations dealing with sensitive information, such as business contracts or personal information of individuals, prefer to join a private blockchain. Private blockchains include Monero, Particl, Dash, and ZCash. These platforms allow users to conduct transactions without making the data public.

Although these “private” blockchains also have open public registries, they allow different levels of permissions for users. Thus, access can be restricted and transaction information can be encrypted to protect confidentiality.

How is a state-controlled cryptocurrency different from other digital coins?

The central bank of China has already rolled out its official cryptocurrency – the digital yuan – after banning the trading of traditional cryptocurrencies such as Bitcoin and Ethereum in the country. The Bank of England, the Riksbank of Sweden and the Central Bank of Uruguay are also expected to introduce public cryptocurrencies soon.

Unlike the digital yuan and other upcoming public cryptocurrencies, Bitcoin and most crypto tokens are decentralized and are fundamentally resistant to outside influence, control, and authority. While Bitcoin and other popular digital currencies are seen as a possible replacement for fiat currency, public cryptocurrencies are more of an accessory to cash.

Probably the biggest difference that sets a state-controlled cryptocurrency apart from others is that the former has legal status. For example, the digital yuan can be used as a payment mechanism and positioned as legal tender. On the other hand, other cryptocurrencies do not have a centralized structure.

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(Edited by : Yashi Gupta)

First publication: STI


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