Cryptocurrency has been trending on the internet, and some may know why and some may not know that as well. The rise of cryptocurrency is so off the charts that now it is what everyone wants as a collection. Ever since Bitcoin grew to greater heights, many such currencies have been entering the market and even today. Some of these are peer to peer currencies that influence the market as well. It is doubtful that the era of information and communication technologies has created many golden opportunities in several respects. One of the areas that benefit from these technologies and online connections is the financial and business sector. An increasing number of online users have activated virtual world concepts and created new business phenomena. As a result, new types of trading, transactions, and currencies have emerged. Cryptocurrency is one of the remarkable financial forms that have emerged in recent years.
India has over a billion people, has been on some economic renaissance in the last few years. Such was the extent of the country’s growth that the IMF (1) called the fastest-growing emerging economy. More than 40 percent of the country’s population has access to telecommunications and internet services. When it comes to technological advancement, a country steeped in mystery, history, and culture is also not one to fall behind. Bitcoin and other currencies have been existing within the country for several years. This article examines the state of the Indian cryptocurrency market. Small-scale Bitcoin transactions were already taking place within the country as early as 2012. These were still early days in Bitcoin’s development when only crypto hobbyists were interested in Bitcoin. By 2013, Bitcoin had begun to gain a level of popularity that had spread across many countries.
Thanks to the rapid growth of information and communication technologies, many activities in our daily lives have been merged online and become more flexible and effective. A massive rise in the number of internet consumers has triggered virtual word concepts and created a new business phenomenon called cryptocurrency to facilitate financial activities such as buying, selling, and trading. Cryptocurrency represents valuable and intangible objects used electronically in a wide range of applications and networks, such as social network sites, online social games, virtual reality, and peer-to-peer networks. The use of digital currency is becoming prevalent in many multiple platforms.
Cryptocurrency is an extremely revolutionary innovation with a high carbon footprint that can impact many stakeholders in today’s trust-based financial system. The Reserve Bank of India, its issuing currency, and its supervisory role in the payment system are the first victims because blockchain is completely decentralized and anonymous. But if we place cryptocurrency in a larger picture of the digital economy, the casualties list will be larger. As fintech moves closer to banks on the credit side, cryptocurrency may replace the current legal tender, in which case the central bank may lose control over the creation of money, or the money undergoes a compositional transformation.
What is Cryptocurrency?
Cryptocurrency uses blockchain and cryptography to ensure no duplicate expenditure and a super-secure transaction at the fundamental technology level. This arrangement does not involve a central issuing or supervising authority such as a central bank. The overall amount of bitcoins that may be issued also is fixed as well. Cryptos can also be backed by assets such as gold. However, it is also important that while most cryptocurrency is based on blockchain, not all blockchains are cryptocurrencies. That’s why even if cryptocurrency is prohibited in India, it’s not the main blockchain technology. RBI had also removed cryptocurrency from its regulatory sandbox guidelines and evaluated innovative blockchain uses in other domains such as trade finance (2).
The rising interest in India
The increasing interest by many Indians in the adoption of cryptocurrency, which is no longer seen as a taboo after the Supreme Court’s decision in March, has been one of the defining points of 2020 in terms of investment alternative assets. In its verdict, the apex court relaxed the rules enforced by the Reserve Bank of India on digital currencies in April 2018, which prompted many individuals to show interest as exchanges saw a ten-fold increase in sign-ups the previous year. Bitcoin, the most traded cryptocurrency, surpassed all other asset classes in 2020 with more than 200 percent returns and became a key driver of investor interest in cryptocurrencies, often referred to as an alternative to gold and inflation hedges.
As time has progressed, cryptocurrency has become a means of exchange or payment medium. Limited supply and high valuations make cryptos a likely value-storage asset. Simultaneously, however, their stretched valuation increases their appeal for chit funds (3) such as fraud and money laundering. In a short period, cryptocurrency exchanges started to emerge within the country. Pioneers like BtcxIndia, Unocoin, and Coinsecure have started providing cryptocurrency transaction and exchanging services in India. Others like Zebpay, Koinex, and Bitcoin-India have been added to the list over time. With the emergence of crypto trading and exchange platforms, India’s crypto market has matured from a reasonable pace in 2013 to what was today. In addition to such online exchanges, there seem to be several over-the-counter crypto shops in the country (4).
Crypto Bill 2021 – what might happen?
The Government may draft a bill to restrict, with exceptions, the buying and selling of cryptocurrencies in India and set up the formal digital currency framework to be issued by the RBI. The move is likely to end the cryptocurrency ambiguity prohibited or legalized in India (5). The RBI prohibited banks from dealing with crypto exchanges, but India’s Supreme Court overturned that embargo in March 2020. According to the Lok Sabha Bulletin, the Regulation of the Official Digital Currency Bill 2021 is likely to be introduced at the Parliament’s Budget Session. The bill, if passed, prohibits the use of cryptocurrency as a legal tender and currency. The bill will restrict all private cryptocurrencies in India, but it will permit certain exclusions to support the underlying cryptocurrency technology and its use (6).
In 2018, the Indian government panel recommended a ban on all private cryptocurrencies and proposed imprisonment of up to 10 years for offenders. The panel also advised that the Government explore a digital version of the fiat currency and implement it. At the time, RBI said a move was needed to reduce the damage to the financial system. It also argued that Bitcoin and other cryptocurrencies could not be treated as currencies because they are not made of metal not exist in their physical form for usage, nor have they been stamped by the Government. The notification from the central bank in 2018 sent panic to several local startups and companies offering cryptocurrency trading services (7).
People’s battle for cryptocurrency
It has been long since rumors about the Indian Government planning to ban cryptocurrency trading have been circulating since early August. Reports had also told at the time that the Government had held consultations with several ministries, as well as the Indian Reserve Bank, to develop a framework for legislation that would formally put an end to crypto trading nationwide. At the time, the government official said that it would be submitted to the Cabinet for approval after inter-ministerial consultations, which was currently underway in the bill. He added, “As soon as the Parliament resumes its session, we hope it will be ratified.” The news reversed the Supreme Court’s original decision, which reversed the controversial constraints restricting banks from dealing with transactions. The measures in question resulted in the inability of many cryptocurrency firms and crypto exchanges to operate, with some stopping their activities forever (8).
While hostile to cryptocurrencies, Indian banks have shown that they are quite fond of blockchain. At the end of January last year, 11 Indian banks jointly set up a blockchain-based digital ledger system to improve credit access for micro, small and medium-sized enterprises. In March 2019, India’s trade secretary also showed a clear openness to blockchain technology. The regulator launched a blockchain-based app for Indian coffee trading, which aims to reduce the number of mediators between coffee growers and buyers, build farm-to-cup accessibility (9) and help farmers increase their incomes by much as 100 percent. The people want the Government to understand the importance of it towards the economy.
Like Japan, there are so many other countries that have regulated cryptocurrency in their respective jurisdictions. For example, Canada does not treat virtual currency as a valid legal tender. Still, it allows these currencies to be traded in the country by making few amendments to the Canada Proceeds of Crime and the Terrorist Financing Act. This not only allows virtual currencies to be legalized as a money services business to protect against money laundering. However, many countries recognize and legalize this activity and can tax traders under different laws. For example, Israel is taxing it as an asset, while the United Kingdom is taxing it under different branches, such as Corporation or Corporate Tax, while individuals are taxing capital gains (10).
A currency based off on influence
See, cryptocurrency is based on P2P, as mentioned before. Thus it always works on influence; no wonder bitcoin grew to the moon. In 2013, it stood at less hundred dollars, and its value was undermined by many, but those who stuck with it know the real value of the currency today. Today, it stands at 35000 dollars and is rising and falling at the same. It isn’t a bad thing, and it always works on influence. Recently, the Dogecoin, a crypto coin purely based on quality content on social media, blew from one rupee to seven rupees! All because Elon Musk appreciated coin using the picture of a Vogue magazine instead written as “dogue.” (11). This grew the currency so high that many anticipated for it to touch a dollar. Many invested thousands of dollars in haste only for it to fall the next day back to its earlier value.
One cannot predict how these currencies might take the investors for granted, so the Indian Government hates it. One could say the economy might shift for good or bad, but nobody knows how and why. The Crypto bill for 2021 is what the country is anticipating, and if the Government provides guidelines and frameworks, this could benefit everyone equally and boost the value of digital currencies. However, some users haven’t yet realized the full picture of the use of cryptocurrency. Many cryptocurrency firms still do not deserve that much trust. There are many concerns, challenges, and issues in many cryptocurrency platforms, and they are clearly outlined in the above sections of this paper. Until cryptocurrency is well regulated and controlled, users need to take extra precautions to use such virtual money (12).
The Cryptocurrency concept’s future is convincing, revealing more potential for effective change and progress in the e-commerce and e-Payment sectors. With rapid progress and technology improvements, cryptocurrency will not stop making progress. Since our study, progress has been made towards improving and expanding the concept of cryptocurrency. More and more vendors accept payment with different types of cryptocurrency, and many people are now more aware of the potentials and opportunities that crypto can offer. New forms of virtual currency have also emerged and have recently spread around the world (13).