By Adv. Nikita Vaigankar
Cryptocurrency is a digital or virtual currency that uses an online ledger with strong cryptography to secure online transactions. It is a form of payment that can be exchanged online for goods and services. Many companies issue their own currency in the form of tokens.
An important feature of cryptocurrency is that it is decentralized and works based on blockchain technology. Blockchain technology simply means a database in which information is stored in blocks and is chained together. Here, data which is stored is irreversible which simply means, it cannot be reverted back.
Another distinctive and noteworthy feature of cryptocurrency is that they are not issued by the government and that is why they are immune to government interference. In fact, they are in the form of a peer-to-peer economy, which is regulated by everyone and no single entity has any control over it.
Cryptocurrency has been speculated as an investment strategy for the past few years. India has been witnessing investment in the cryptocurrency space and one of the reasons for such popularity is the disillusionment with the banking system and its rules which are not so transparent thereby, giving hardships to its customers.
A much-awaited step towards the regulation of cryptocurrencies is the bill initiated by the government regarding the cryptocurrency and hence, there are various panels formed to discuss issues relating to cryptocurrency and the same is being formulated into reports. It is speculated that the bill is aiming to prohibit all private cryptocurrencies in India and create an official digital currency to be issued by the Reserve Bank of India. The government is also taking steps to be less harsh on the regulation of cryptocurrency, as the ‘Regulation of Official Digital Currency Bill, 2021’ is being introduced and is happily welcomed by the crypto community.
On one hand, in 2018 cryptocurrency has been introduced and was spreading like wildfire while on the other hand, RBI advised all the entities regulated by it, not to deal in digital currency, and thus, an indirect ban was levied on cryptocurrency.
But later in 2020, Supreme Court quashed the said order of RBI in the case of ‘Internet and Mobile Association of India versus RBI’ (MANU/SC/0264/2020). Here, the court held that a ban on cryptocurrency is bad in law as it hinders the fundamental rights of citizens to carry out any legitimate trade. The decision came after two years after the ban and the order came after several petitions were filed against the RBI ban.
Even though the ban was lifted the government still was not in favor of cryptocurrency and always advised or in fact, warned its citizens not to invest in digital currencies. However, even after several warnings the thriving of cryptocurrency in India has not stopped or lowered, in fact, it has been on a steady rise.
Most of the experts believe that the Indian government is adopting a ‘wait and watch approach as the government is still observing what is happening in the crypto space across the world, especially in developed countries.
If India adopts cryptocurrency, there are various advantages of cryptocurrency as it reduces financial fraud due to its high security. It enhances an immediate transaction and lowers fees. It will also attract FDI and will boost technological development. Thus, driving our economy to high levels. On the other hand, a major disadvantage to cryptocurrencies is hidden in its advantage itself and that is, its decentralized nature. Digital theft will be common and the investors are afraid because of the volatile nature of the cryptocurrency as they are very much uncertain.
It is noteworthy that even though, Supreme Court in its judgment which is mentioned above has lifted the ban on cryptocurrency, it does not mean that the government cannot impose a ban. Further, if legislation is introduced to put a ban on cryptocurrency, the Supreme Court cannot do anything until and unless there is a proper writ petition with genuine and logical reasons to repeal the said legislation.
I firmly believe that with such wide popularity of cryptocurrency, which is gaining day by day, it is difficult to believe that the government will outrightly ban cryptocurrency usage in India. In fact, the government will try to implement more legal provisions to regulate the same but won’t ban it altogether.
No doubt that India has a bright future in cryptocurrency but still as of now, the digital currency has not reached its full potential as many citizens are unaware of what cryptocurrency actually is. The most important reason as to why the government is afraid of cryptocurrencies or why it is not freely implementing its usage is because if the cryptocurrencies are brought into use, then since they are decentralized, the government will lose monopoly over the Indian rupee.
At present, the activity of trading in cryptocurrencies such as ‘Bitcoin’, which is a very popular cryptocurrency, is limited to a large extent as there are no trade regulations for the same, and doing so, can give rise to fraud, money laundering, and even funding to the terrorist activities. While it is evident that cryptocurrency is dependent upon the global market and presently, the position is that people are investing in it and holding them for now as there is a strong belief among them of success due to which, there is a high rise in the rates of cryptocurrencies.
The future of cryptocurrency in India is very progressive, which is visible as RBI has taken the step to launch CBDC (Central Bank Digital Currency). This will surely boost the surge of cryptocurrency investment. CBDC is basically a legal tender issued by the Central Bank in the digital form and it is the same as physical currency which will include coins, cheques, securities, bonds, etc. The need for CBDC by the RBI is to maintain control over currency because if private cryptocurrency is allowed, RBI or government will lose financial control.
After all, anything and everything seems to be unacceptable until and unless it is put into use or becomes a part of everyday life and once it is dissolved in our lives, we tend to adjust ourselves and accept the same. Similarly, cryptocurrency will also be added to our day-to-day activities through their evolution and ultimately, it will become our habit and necessity in transactions.
The government machinery and other authorities would have to accept the same as it would succumb to the popularity of cryptocurrency but for this, a prerequisite is that it is very essential that digital literacy is implemented in our country as India is digitally divided and hence, even though if cryptocurrency is legalized and boosted, there won’t be beneficiaries in all sorts of fields but the real beneficiaries would be only rich class people who already have access to technology and thereby, creating broad disparity.