Journey of Cryptocurrency in India

Despite their growing popularity, cryptocurrencies remain a relatively new and evolving technology. As a result, they present opportunities and challenges like regulatory concerns, security issues, and market volatility.

What is Cryptocurrency?

Cryptocurrency is a digital or virtual currency that uses cryptography to secure and verify transactions and control new units' creation. They operate independently of a central bank and are decentralized, which means that a government or any other institution does not back them.

Cryptocurrencies are typically stored in digital wallets and can be purchased or exchanged with other currencies or assets. Transactions are recorded on a blockchain public digital ledger, ensuring the system's security and transparency.

Journey of Crypto in India

In 2018, the RBI issued a circular prohibiting banks from dealing in virtual currencies or providing services to facilitate any person or entity dealing with or settling virtual currencies. However, in March 2020, the Supreme Court of India overturned the RBI's circular, allowing banks to provide services to cryptocurrency exchanges and traders. This decision was seen as a positive development for the cryptocurrency industry in India, and since then, several exchanges have resumed operations.

?In addition, the Indian government introduced the Cryptocurrency and Regulation of Official Digital Currency Bill in 2021. The bill seeks to ban all private cryptocurrencies in India and create a framework for introducing a digital rupee issued by the RBI. In the 2022 budget, Finance Minister Mrs. Nirmala Sitharaman announced revolutionary changes to the virtual asset class. For the first time, the government officially termed digital assets, including crypto assets, under Virtual Digital Assets. Furthermore, income from transfers of these virtual assets will be taxed at 30% and 1% TDS.

On March 7, the finance ministry notified that Virtual Digital Assets and fiat Currencies, including Cryptocurrencies & other digital assets, and their trading and related services would come under the Prevention of Money Laundering Act (PMLA), 2022. Therefore, crypto dealers, exchanges, and entities must now perform KYC due diligence for users like banks and payment system operators

India's stand on Crypto

India's stance on cryptocurrency has been mixed. RBI has been wary of cryptocurrencies and has warned the public about the risks associated with investing in them.?

Regulatory uncertainty: The Reserve Bank of India (RBI) has expressed concerns about cryptocurrencies and has issued several warnings to the public about their use. The Indian government is drafting a regulatory framework for cryptocurrencies, leading to uncertainty among investors and traders.

Investment opportunities: Despite the regulatory uncertainty, many Indians have invested in lucrative cryptocurrencies. The rising popularity of cryptocurrencies has also led to the emergence of cryptocurrency exchanges in India, providing investors with more options to buy, sell, and trade cryptocurrencies.

Remittances: Cryptocurrencies can be used for remittances, particularly useful for people who want to send money abroad. Cryptocurrencies can be sent quickly and securely, with lower fees than traditional money transfer methods.

Blockchain technology: Cryptocurrencies are built on blockchain technology, which can potentially transform various industries, including finance, healthcare, and logistics. Indian companies are increasingly exploring the use of blockchain technology in their operations.

Illegal activities: Cryptocurrencies have also been associated with illegal activities, money laundering, and the financing of terrorism. In 2018, the Indian government announced a cryptocurrency crackdown to prevent these illegal activities.