Since the inception of Bitcoin in 2009, the cryptocurrency’s technology has been quite noticeable. Because of its autonomy and convenience, the new type of currency has become a popular and viable source of cash all across the world. To serve as an alternative source of money, many varieties of cryptocurrencies have been developed. Some claim that cryptocurrency will have a detrimental influence on the global economy, whereas others believe that it would improve it. The legitimacy of cryptocurrencies in India has been a bit hazy so far. The country does, in fact, have a thriving blockchain market that has been there for at least five years. The legal battles around cryptocurrencies, on the other hand, began in 2018. A new bill was set to be introduced in the Parliament’s ongoing 2021 winter session; however, it is still in the works, and the final text has yet to be approved by the Cabinet.
Cryptocurrency is a category of digital currency which employs cryptography to protect transactions, curb the production of new units, and authenticate asset transfers. Various encryption methods and cryptographic approaches are referred to as “crypto.” Each “cryptocurrency” has its own set of characteristics that cannot be evaluated or comprehended by drawing broad conclusions. The word is used to refer to any token that is created using cryptography. Convertible, decentralised virtual currencies are now referred to as “cryptocurrencies” in widespread usage. There are about 6000 cryptocurrencies available as of November 2021. As of 2021, the prominent names are Bitcoin, Ethereum, Binance Coin, Cardano, Solana, Ripple, and Polkadot. Cryptocurrencies, such as Bitcoins, are popular because they offer more modern, digital money. A third party does not handle transactions on these sites. This enables dealings to be finalized uninterruptedly between the buyer and seller. Cryptocurrencies may either be mined or bought on cryptocurrency exchanges. Not all e-commerce sites accept cryptocurrency payments. In reality, even famous cryptocurrencies like Bitcoin are rarely utilised for retail purchases. On the other hand, Cryptocurrencies have become popular as trading tools because of their increasing value. They are also utilised for cross-border transfers to a limited degree.
History of Cryptocurrency
In 1991, Haber and Stornetta proposed the notion of blockchain for the first time. Blockchain is a distributed ledger technology that is made up of small chunks of data called blocks. Each block or coin is mined using complex math and cryptography, followed by a lot of ‘labour’ or arriving at the right answer to be accepted in the blockchain. Mining a new block or “coin” is, therefore, a tremendously demanding and time-consuming task, and the efficient and effective miner is rewarded with a new “coin.” Advanced hardware and a lot of effort are required to produce or’ mine’ a cryptocurrency. The notion of a digital currency based on cryptography in its current form was first proposed in 2008 by “Satoshi Nakamoto” under a pseudonym. The establishment of cryptocurrency exchanges has aided the evolution of cryptocurrencies throughout time. Through such deals, a new ecosystem is emerging, which, if properly regulated, can promote the seamless participation of a more significant number of people in cryptocurrencies.
Cryptocurrency and the Economy
Because all economies have embraced particular currencies (fiat currency) as a means of exchange, today’s economies are all money economies. Many governments worldwide are focused on digital currencies and transactions these days. Even some people do not want their money and transactions to be regulated. This resulted in more innovation in a new currency, cryptocurrency, one of the most sophisticated, ambiguous, and regulation-free currencies. There is a wide range of characteristics across cryptocurrencies, which are also changing over time as the unique qualities of each instrument evolve.
Some claim that because Bitcoin and other cryptocurrencies eliminate the need for middlemen such as banks, it would have a detrimental influence on the global economy, particularly in underdeveloped countries. Mainly due to its novelty and general lack of trust among buyers. Others who view crypto in a positive light argue that the lack of regulation promotes democracy. They further contend that crypto promotes ‘financial inclusion’ in poor nations at an unprecedented pace due to enhanced transparency during transactions, cheap transaction costs, and the possibility to beat inflation if held as a store of wealth.
The legality of Cryptocurrency
The government or monetary authorities grant fiat currencies their power as a means of exchange. Cryptocurrencies, on the other hand, are not backed by any government or corporate entity. As a result, establishing their legal standing in many financial countries throughout the world has proven problematic. The fact that cryptocurrencies have primarily operated outside of the current economic infrastructure doesn’t help things. El Salvador was the first country in the world to accept Bitcoin as legal money for monetary transactions as of December 2021. Crypto laws in the rest of the world differ as per jurisdiction.
Bitcoin has also been praised for its several advantages, including minimal transaction fees and quick processing. That explains why hundreds of billions of dollars have poured into new kinds of currency in recent years. Blockchain, the technology that underpins bitcoin, has also come to a step closer to widespread acceptance.
Cryptocurrency in India
Between 2012 and 2017, the popularity of cryptocurrency in India grew immensely. In India, cryptocurrency exchanges such as Zebpay, Coinsecure, Unocoin, Koinex, and Pocket Bits have sprung up during this time. Several other cryptocurrencies were also introduced in the global digital economy throughout this time period. It is also essential to note that Bitcoin, the most popular cryptocurrency, had risen from roughly $5 at the start of 2012 to almost $1,000 by the end of 2017, which genuinely reveals the growth of popularity of crypto.
In 2013 and 2017, the Reserve Bank of India stated on cryptocurrency in two press announcements that expressed its concerns on cryptocurrencies. The announcements very clearly indicated that the virtual currency is not backed by them as well as disallowed commercial banks from accepting it as a deposit or a medium of exchange. This statement was set aside by the Supreme Court in 2017 due to two PILs filed, one for banning crypto and the other for regulating crypto.
It is imperative to understand that crypto has never been banned in India, and neither has crypto mining. At the same time, it is not completely legal to trade in crypto either since there is no law governing it; it lies in the ‘grey’ area of the law.
The crypto bill that the Cabinet is currently working on is unlikely to outright ban cryptocurrencies, but it will regulate them. As per a report, India’s cryptocurrency exchanges would be regulated by the Securities and Exchange Board of India (SEBI). Citizens of India would be compelled to keep their cryptocurrencies on Indian exchanges solely – the new legislation is said to make it illegal for users to maintain their funds on worldwide exchanges or in private wallets. People would have a set length of time to move their funds when the law is implemented, after which they might be penalised in the range of 5 to 20 crore. According to our Finance Minister, Mrs. Nirmala Sitharaman, the government is aggressively scrutinizing the hazards that cryptocurrencies pose to the Indian economy. The future of cryptocurrency in India is still uncertain, owing to the fact that the central government wants further consultations on the subject before making a final decision about its crypto bill.
There appears to be no end to the uncertainty in India’s cryptocurrency industry, as the nation seems to have put off creating legislation that will indicate its regulatory approach to the quickly developing business for yet another time. According to reports, the central government is considering revising the new crypto bill. For over a year, the legislation has been in the developing stage. The necessity for broader consultation owing to developing cryptocurrency laws throughout the world was stated as one of the reasons for the delay.
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