What is Cryptocurrency?
Cryptocurrency is an internet-based medium of exchange which uses cryptographical functions to conduct financial transactions. It is used to control the creation of additional units of currency and verify the transfer of assets between parties. The salient features of this currency are that it is decentralized, transparent, immutable. The decentralized nature of the blockchain makes cryptocurrencies immune to government control and interference. A person can make payments through bank transfer or credit card. One has to first register themselves with their full information, verify their identity and undertake a two-step verification for security purposes. Cryptocurrency consists of a network of peers. Every peer has a record of the complete history of all transactions and thus of the balance of every account. As long as a transaction is unconfirmed, it is pending and can be forged but when a transaction is confirmed, it is set in stone. It is no longer forgeable, it can’t be reversed, it is part of an immutable record of historical transactions: of the so-called blockchain.
Cryptocurrency in India: What was the case?
While it gained popularity around the world, the Reserve Bank of India had banned cryptocurrency trading in India as in a circular issued on April 6, 2018. The central bank barred banks and other financial institutions from facilitating “any service concerning virtual currencies.” The 2018 notice from the central bank shut down several local startups and companies offering services to trade in cryptocurrency. A group of petitioners including a trade body (The Internet and Mobile Association of India) had challenged the central bank’s circular, arguing that India should look at most other nations that are not only allowing cryptocurrency trading but have also moved on to launch their virtual currencies. In a 104-page written submission that won the case, the major argument put forward was that the RBI could not issue such a ban, it is outside the zone of the RBI’s regulatory purview and that the RBI had never before used its statutory powers in such a manner as to proscribe an economic activity based on the nature of the activity alone. In the ruling on 4th March, the bench, headed by Justice Rohinton F Nariman comprising of Justices S. Ravindra Bhat and V. Ramasubramanian, overruled the central bank’s circular on the grounds of disproportionality. The latest move by the Supreme Court is being lauded by individuals and organizations alike.
Benefits of Cryptocurrency in India
Despite the ban, traders and investors were betting heavily on these currencies. Soon after the ban, peer-to-peer trading had increased while several other local exchanges shifted to more crypto-friendly jurisdictions. The last few weeks have seen unprecedented crypto developments in the country. While big players like Binance, OKEx have made their way to the Indian market either through acquisition or partnership, India’s biggest player Zebpay which had shut down its services also announced a comeback. The RBI will reconsider its approach to cryptocurrency and come up with a new, calibrated framework or regulation that deals with the reality of these technological advancements.
The cryptocurrency industry will revolutionize our country’s economy as it will enable small merchants and businesses to make use of digitalization, make financial transactions easier, make settlements much faster. Also, the bringing in of such technologies and companies will be the key to ushering in a new industry that will have a tremendous impact on the overall economy, in the long run. Not only does it create jobs, but it puts India in the game of a booming industry that emphasizes on decentralizing the epicenter of money control. Cryptocurrency offers a massive growth opportunity to the blockchain and cryptography technology companies.
The Future of Cryptocurrency in India
Plans are being devised in the country to ban cryptocurrencies again. While it is yet unclear what exactly the government’s move against cryptocurrencies will be, what is clear is the fact that implementing it is going to be incredibly difficult. People in India are looking to buy something in terms of cryptocurrency. Currently, there are approximately 10 large crypto exchanges in India with an estimated user base of nearly 5-6 million. Last month, a meeting of the finance ministry discussed the ban on private cryptocurrency in India.
According to experts, it may be easy to ban big-time exchanges but nearly impossible to block the small, local exchanges. Crypto investors may resort to peer-to-peer channels to transfer their investments into the overseas exchanges. Once an Indian (citizen) invests in foreign exchange, it might become impossible for the government to trace his or her investments because most foreign exchanges allow conversion to private coins which makes transactions untraceable. Such transactions can be easily done by using VPN (virtual private network) which makes access to even blocked sites easier. As there are always two sides to a coin, cryptocurrency in India will make money laundering an effortless task. Price volatility, the complex nature of these digital assets, and high chances of consumer fraud are also drawbacks of this currency form. If steered in the right direction, this industry can raise India’s development graph to the next level or it may even be the other way around, but all we know now is that cryptocurrency is the future.
Written By: Jeevana Allu
Edited By: Harshit Agarwal
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