"Crypto Currency- A need of the hour for the Indian Banking System"

It has been a while since Crypto Currencies are making a mark in the global economy. With the introduction to today's much talked Crypto currency “Bitcoin”, which registered its entry more than a decade ago has made an extraordinary presence in the crypto world. Crypto currency is any form of currency that exists digitally or virtually and uses cryptography to secure transactions. Crypto currencies don't have a central issuing or regulating authority, instead using a decentralized system to record transactions and issue new units.?

?Beginning with trading at US$0.0008 in July 2010 to all time high to US$68000 in November 2021 to US$38000 in the present bearish market because of ongoing Russia-Ukraine war. Shiba Inu, known as a meme token (a crypto asset based on a meme or an internet joke) yielded more than 800% returns to the early investors. Doge coin, again a meme coin witnessed 1421% growth, as it was mentioned multiple times in twitter by a very famous automobile entrepreneur of the USA.?Over the period of time, thousands of financial tokens and currencies popped up and big investors (known as whales in crypto world) and common people have started investing money anticipating high returns. The co-founders of one of the biggest crypto companies, Polygon with Matic as currency are Indians, with a present market cap of around $10,788,085,444.?

?The Supreme Court of India lifted the ban on investing in crypto currency in March, 2020, however the Indian government has not made it legal yet.?But during the presentation of Union budget 2022, the Finance Minister of India said that ‘Gains from trading in crypto currencies and related assets like non-fungible tokens (NFTs) will be taxed at a flat 30% and 1% of tax will be deducted at source (TDS)’. The underlying fact to this could be the status quo for the crypto market.?

?India, being the second most populated country in the world after China, has a huge customer base and so is the banking system. The banking sector is dominant in India as it accounts for more than half the assets of the financial sector. The Indian banking system consists of 12 public sector banks, 22 private sector banks, 44 foreign banks, 43 regional rural banks, 1,484 urban cooperative banks and 96,000 rural cooperative banks in addition to cooperative credit institutions. According to the RBI, bank credit stood at Rs. 109.56 trillion (US$ 1.48 trillion), as of September, 2021. The Assets of public sector banks stood at Rs. 107.83 lakh crore (US$ 1.52 trillion) in FY20. India is the world's largest market for Android-based mobile lending apps, accounting for ~82% of all online lenders worldwide.

Over the last two years, multiple waves of Covid-19 followed by lockdown and subsequent decline in economic growth, the banking sector has seen an unprecedented rise in non-performing assets (NPAs). Macro stress tests for credit risk indicate that the gross non-performing asset (GNPA) ratio of banks may increase from 6.9 per cent in September 2021 to 8.1 per cent by September 2022 under the baseline scenario, and to 9.5 per cent under a severe stress scenario, according to the Financial Stability Report of the RBI.

?As of January 2022, the total number of crypto currency users of India is more than 20 million people with assets worth more than US$1.5 billion. The crypto bandwagon is increasing at an exponential rate, in spite of the fact that there are no underlying assets and involving high market volatility and risks. The upcoming world of Virtual reality “Metaverse” is already creating a buzz in all domains of businesses with rapid and extraordinary investments from the leading corporations of the globe. It promises to give a real time 3D experience to its customers. The bottom line of Metaverse is acceptance of crypto currency as legal money for all?types of transactions. At present, Indian consumers are holding crypto assets on foreign exchanges and in private wallets paying hefty transaction fees. Besides, there is a sense of insecurity from the side of the Indian government on probable ban and complete decentralization and no track block chain management of crypto world from the seller side.

?The positive side of decentralized banking includes no set hours i.e. open 24x7, 365 days a year, variable transaction fees depending upon the nature of currency, swift transaction, basic identity verification with an email id and phone number as one time KYC, utmost privacy and security however the negative and the most dangerous side of it is tracking down the accounts because of inter connected database in form of block chain.?

?Considering the existing massive customer base, high volume of transactions in?products of banking, the sector can milk a huge investment by regulating its own crypto currencies in the market. Since banks have the underlying assets and presence in stock markets, the trust and confidence of customers will be far superior. The Reserve Bank of India, the central authority to the banking system may think of decentralizing the currency, if not all, at least a small part of it.?If regulated and visible profits are seen, banks may increase their market capitalization by leaps and bounds in the coming future.?