Cryptocurrency is the new buzzword these days. Though the economy has grown inexorably over thousands of years of transition. The mercantilism period, which saw trade through the exchange of gold and silver, and later into a barter system are relics of the past today.
Transactions between people reach new unprecedented growth these days, with changes becoming complex, resulting in a slew of repercussions.
Cryptocurrency: Where it all started.
Cryptocurrency has grown in popularity, resulting in several legal ambiguities. In recent years, it has brought about a tremendous transformation among investors that a guy of average caution has yet to comprehend.
Several questions still remain unresolved or unanswered.
When cryptographer David Chaum created the DIGICASH platform, a cryptographic electronic payment system, the notion of electronic money established itself for the first time.
This platform, however, could not last for long and finally perished. Then, in 2009, Satoshi Nakamoto invents the first cryptocurrency-BITCOIN, which was totally decentralized.
Slowly the market became flooded with new cryptocurrencies, prompting changes to the original concept to make it easier.
Since then, the cryptocurrency industry has grown at an incredible rate and is further expected to grow in the future. As a result, the bitcoin market/industry exceeds USD 2 trillion for the first time in April 2021.
Decoding the term: Cryptocurrency and Blockchain technology.
The term cryptocurrency is a digital or virtual currency that is secure by cryptography, which makes it nearly impossible to counterfeit or double-spend.
Many Cryptocurrencies are decentralized networks based on blockchain technology. It is a way of carrying out transactions between two persons or constructing an asset in which each transaction is under protection by strong encryption.
The highly decentralized nature of the cryptocurrency and the peer-based network with each network keeping a record that records every transaction made through the cryptocurrency makes it extremely secure.
These two characteristics, when combines, make cryptocurrency highly popular today by establishing a new paradigm for how financial or monetary transactions take place.
Is Cryptocurrency a secure way to invest?
Cryptocurrency is based on blockchain technology, making it extremely difficult for anybody to bypass the system and take advantage of it.
So, what is Blockchain Technology, exactly?
Blockchain is a system with a distributed ledger of the transactions is maintained, with a history. This ledger of the transaction is both unalterable and visible.
It minimizes risk, increases transparency, removes centralized authority, makes it decentralized and dependable, and so on. As a result, it may be utilized in various areas, including payments, cybersecurity, and healthcare.
Portfolio diversification is a fundamental element of investing and is critical for risk management. Cryptocurrencies such as Bitcoin exhibited practically no price correlation with the US market. So owning some can help your portfolio.
Therefore it is sensible to acquire some crypto directly as part of a diversified portfolio.
Are cryptocurrencies legal in India?
Despite millions of individuals in India investing in cryptocurrencies, many people are still unsure about their status. Therefore, questions such as whether cryptocurrency is legal in India are always at the forefront.
This perplexity stems from a number of recent occurrences in India that have had a significant influence on the cryptocurrency sector in the country.
Between 2012 and 2017, when businesses like Zebpay, Unocoin, and others emerged and began operating in India, the cryptocurrency sector flourished. It was about this time in 2018 that the Reserve Bank of India issued a circular.
It forbids banks, NBFCs, payment system providers, and other financial institutions from dealing in any type of virtual currency or payment system.
This had a significant impact on crypto exchanges, and many of them went out of business due to their inability to access banking services. In addition, it prompted individuals to file a writ petition in India’s Supreme Court.
Supreme Court Lifts RBI’s Prohibition on Cryptocurrency
The petition in the name of Internet and Mobile Association of India v. Reserve Bank of India was brought in the Supreme Court of India. This was against the RBI circular on regulating cryptocurrency.
IMAI made claims that it was excessive use of power by the RBI and violated Article 19(1) of the Constitution (g).
A three-judge bench of the Supreme Court stated that while the RBI as a central bank can take pre-emptive actions.
Therefore, according to the Supreme Court, RBI was entirely within its authority to publish such a circular to protect the banking industry.
However, there was no Proportional Damage in this instance, and there is no case in which the advent of cryptocurrencies in India has impacted the financial system or the Indian economy.
As a result, the circular is without merit. It cannot be allowed to infringe on bitcoin exchanges’ fundamental rights in any manner.
As a result, the Supreme Court overturned the RBI’s restriction on crypto exchanges providing banking services in 2020. In addition, the Supreme Court said that cryptocurrency in India is Unregulated and NOT ILLEGAL.
The Indian government has been vacillating on the topic of cryptocurrency and its future, with their first position being that it should be prohibited.
We are now witnessing a paradigm shift in the Government’s position on cryptocurrencies in the Indian market. The authorities are warming to the idea of dealing in cryptocurrencies in controlled regulations.
- The Ministry of Corporate Affairs (“Ministry”) has issued the notification. On March 24, 2021, the Ministry published a Notification amending Schedule III of the Companies Act, 2013. Companies must now report if they have traded in virtual currencies or cryptocurrencies in their balance accounts as a result of the Notification.
- The Government is preparing to introduce a new bill titled “Cryptocurrency and Regulation of Official Digital Currency Bill, 2021” (the “New Bill”).
It is similar in spirit to previous versions but intends to ban private cryptocurrencies in India with certain exceptions. In order to promote the underlying technology and trading of cryptocurrency and provide a framework for creating an official digi currency.
The Government is expected to present the new bill in the upcoming Lok Sabha session.
The Bigger Picture
According to cryptocurrency data from 2018, the global market saw over 1500 cryptocurrencies with over 9400 confirm transactions. The total market value of all cryptocurrencies across the world has risen to $237.1 billion.
Bitcoin accounts for over 40% of the cryptocurrency industry, with a current market price of 5,12,461 INR. With a population of over 1.3 billion people and an economy that is continuously expanding and prospering by the day.
India has a great potential of becoming a cryptocurrency success story. After being in news as the world’s fastest-growing economy by the IMF, India’s economy is experiencing a dramatic transformation.
“Bitcoins will do to banks what email did to the postal sector,” one entrepreneur previously predicted. Given the rise in the value of bitcoins, this remark is entirely accurate.
Cryptocurrencies which result from cutting-edge technology are nevertheless illegal owing to their untraceable and anonymous nature. Therefore, it is impossible to avoid the harmful consequences of security and other social concerns in the virtual era.
Countries that are regulating cryptocurrencies must look into the risks that come with doing business with them.
The Blogger would like to end by emphasizing in light of the rapid advancement of technology, we must recognize the cryptocurrency.
To take advantage of the benefits that cryptocurrencies offer, such as quick transfers, security, and cost-efficiency, a system of proper regulations should be in place. These benefits will not be available to investors unless an adequate code is in place.
By Kunal Kumar
Kunal Kumar is the Co-Founder of the international prism. He was previously associated as content curator for Lawviapods & is now the editor in chief of the column on Exploring Life in the international prism.
He did his graduation from Dr. Ram Manohar Lohiya National Law University, Lucknow. In addition to being a fitness fanatic, he is also passionate about swimming, trading in Index options, Futures& Equity Derivatives.
He can be reached at firstname.lastname@example.org