Secured by Cryptography, Cryptocurrency is a digital currency, mostly based on blockchain technologies, that has been the talk of everyone for the last few years! Wei Dai is believed to be the founder of such a concept (during the year 1998), under the name of B-Money, further, till Satoshi Nakamoto had developed this as a strong notion in 2009 as the first decentralized cryptocurrency bearing the name- ‘Bitcoin’.
What Are Cryptocurrencies?
Cryptocurrencies are online payment systems, with “virtual tokens” as the general denomination of it, and those which are exhibited by ledger entries, not beyond the system. The term “Crypto” commonly signifies numerous cryptographic approaches & encryption methods, which protect these entries, for example- elliptical curve encryption, Hashing functions, and public-private key pairs.
Cryptocurrencies were new and resistive to several nations, but with time it has been regulated and adopted by many countries, like Japan, Nigeria, France, Australia, etc. When it comes to India, it hasn’t been legally accepted as of now.
What is the purpose of Cryptocurrency?
It is important to consider whether or not the popularity that cryptocurrencies have attained over the years is genuine. Despite the fact that it is still a long way from replacing traditional payment, cryptocurrency, particularly Bitcoin, has gained widespread acceptance around the world.
- As a payment method:
Initially, Bitcoin had minimal value as a payment method for merchants. However, over time, many retailers throughout the world, including restaurants, planes, jewelers, and applications, have begun to use Cryptocurrency as a legitimate payment channel.
Apple Inc. is a significant acceptor of cryptocurrencies as a valid form of payment. It accepts ten different types of cryptocurrency for App Store transactions.
However, as an economy, India has yet to thoroughly investigate cryptocurrencies as a legitimate payment option. Nonetheless, with major corporations such as Apple and Facebook championing its cause, Bitcoin and other crypto’s are projected to gain even more popularity in India in the near future.
- Investment:
Cryptocurrencies, particularly Bitcoin, are one of the most profitable investment opportunities available today. Its value development is quite dynamic, making it a fantastic avenue for capital growth.
Individuals should be aware, however, of the instability of this investment option. As a decentralized entity in India, Cryptos like Bitcoin, Ethereum, Tron, Binance Coin, and other popular cryptocurrencies with the highest market share has seen some of the most volatile price movements.
What’s India’s Current Status On Crypto?
The use of cryptocurrencies in India has undoubtedly increased with the massive increase in internet users.
Nonetheless, the Indian government had no cryptocurrency policy until 2018, with the exception of a few alerts and news releases warning the public of the associated risks with cryptocurrency use. Many companies trading in cryptocurrencies sprang up in the absence of a cryptocurrency policy/statute. According to a survey undertaken by the Indonesian firm Pundi X, “approx one out of every ten bitcoin transactions worldwide takes place mostly on the Indian subcontinent,” as reported by Quartz.
Finally, in his 2018-19 budgetary speech, India’s Hon’ble Finance Minister, Late Arun Jaitley, declared – The govt. does not consider crypto-currencies legal money/coin and will take effective efforts prohibiting their use in funding illicit acts. The same was decided on the lines of anything encompassing anything illegal within the payment system.
Now coming to the general public, Crypto is still not accepted by a majority of the population, as it leads to several questions majorly including it to be a safe & valid tender!
Cryptocurrency’s 2021 Future Progress:
The Indian government is currently evaluating the introduction of a new bill, following the name- “Cryptocurrency and Regulation of Official Digital Currency Bill, 2021”, that also, while similar in spirit to earlier versions, wants to ban private cryptocurrencies in India with certain exceptions in order to enhance the underlying technology and trading of cryptocurrency as well as provide a framework for creating new cryptocurrencies.
The New Bill acknowledges the ambiguous issue of cryptocurrency regulations and wants to outright outlaw all private cryptocurrencies; nevertheless, there is still a grey area in which all types of cryptocurrency would fall under the authority of private cryptocurrency. The RBI has issued a warning to the general public about the potential misuse of private cryptocurrencies in a variety of ways. Nevertheless, if the New Bill enforces a complete prohibition on private cryptocurrencies, cryptocurrency investors will be forced to invest and trade in unregulated marketplaces.
Furthermore, the goal of enacting a virtual currency/cryptocurrency law is to ease the procedure of trading and keeping in a safer digital age. But, also with the introduction of government cryptocurrency that will be controlled by the RBI, all risk elements associated with cryptocurrency investing and holding will remain the same.
Cryptocurrency Trade Regulations in India:
Because cryptocurrency is an essential component of any state and also being in a decentralized state, regulating cryptocurrency would necessitate oversight from several bodies and stringent restrictions, such as:
- 1. The Reserve Bank of India (RBI)- To regulate cryptocurrencies as legal tender.
- 2. The Directorate of Enforcement- Has prohibited the usage of cryptocurrencies in the case of economic crimes.
- 3. Department of Economic Affairs- For controlling the intrusion of cryptocurrencies in the state’s economic policy.
- 4. SEBI- The use of cryptocurrencies in security agreements
- 5. Indian tax authorities- Tax implications for cryptocurrency trading
As a result, establishing a successful framework for regulating all aspects of cryptocurrency trading appears to be a difficult challenge. To establish an administrative position in the cryptocurrency field, the RBI may rely on the blockchain infrastructure. It may also consider granting licenses to crypto exchanges, which may only be granted after a thorough investigation of records and compliance criteria.
What’s Cryptocurrency’s Impact On The Government?
In 2020, which is the pandemic hit year, seeing the advancements of the crypto-regulated countries (such as the United States, Singapore, and others) brought in an enriching prompt for Indian authorities to reconsider their choice.
As a result in the famous Apex court case of Internet & Mobile Association of India vs RBI (MANU/SC/0045/2019), rescinded the RBI circular published in 2018, allowing institutions such as Yes Bank, HDFC Bank, ICICI Bank, and SBI to resume transactions with cryptocurrency exchanges.
Bottom Line
Unless and until an appropriate regulatory framework is implemented, India’s cryptocurrency space would remain unregulated. While the Supreme Court’s judgment has boosted the crypto sector, cryptocurrency beginning in India is growing and releasing new products. There are a few issues because the ministry of finance has published a government law for inter-ministerial deliberations that might ban cryptocurrencies. Despite this, crypto start-ups in India are enthusiastic about cryptocurrency’s huge potential and future, and they are urging the government to prevent implementing a nationwide restriction.
