An Overview of the Concept of Crypto Currency in India

Introduction

There was a barter system of trade in the early stages of human evolution that eventually
faded due to its inherent flaws, and since then, several forms of research have been conducted
to create digital money, and gradually, paper and coin currency have been introduced and
have become widespread all over the world.

In today's economy, we have real money in the form of paper and coins, as well as digital
money in the form of electronic wallets, debit and credit cards, and other forms, all of which
are controlled by central or common authorities.

Cryptography is a decentralized version of digital currencies, with no servers involved in

transaction processing and no central authority to control it.

What is Cryptocurrency and How does it work?

A Cryptocurrency is a form of digital currency that is used in transactions and trading. It's
similar to paper money, but it's not real. Cryptocurrencies are a decentralized type of money,
which means they are not and cannot be controlled by any government or group of
governments.

It is primarily based on cryptography principles (a method of protecting information and

communications through the use of codes so that only those for whom the information is
intended can read and process it). The prefix "crypt" means "secret" or "vault," and the suffix
"graphy" means "writing."

It is thought that replication of transactions or the use of counterfeit currency will be unlikely
in this mechanism. Many cryptocurrencies are decentralized networks based on blockchain
technology; a blockchain is a continuously increasing list of records. They're called blocks,
and they're what connect and protect each form of cryptocurrency. Then there's mining,
which is a single network where all the money is stored. To put it another way, mining is the
method of validating a cryptocurrency. The newly launched dogecoin is one of the most
common cryptocurrencies.
Pros and Cons of Cryptocurrency

Pros of Cryptocurrency:

1. Inflation-Protected Investments

Every form of currency in the world has been affected by inflation. The value of the currency
is determined by the global and national economies, and it will fluctuate with the economy.
Since only a limited amount of cryptocurrency is published at a time, it is safe from inflation.
This limit raises demand, which helps to hold inflation in the long run.

2. Self-Managed and Self-Governed

Any currency's governance and management are important factors in its growth. Developers
receive a charge for storing cryptocurrency transactions on their hardware. These developers
or data miners keep the transaction history up to date, keeping the records decentralized and
ensuring the credibility of the cryptocurrency.

3. Private and Safe

In our modern world, privacy and security are always a concern, and cryptocurrencies are no
exception. The blockchain ledger, which is used in cryptocurrencies, is difficult to decipher
and contains difficult math puzzles. Cryptocurrencies are more reliable than other currencies
for completing electronic transactions because of their high level of difficulty.

4. Convenient Currency Exchanges

Since cryptocurrency can be purchased with a variety of global currencies, it can be easily
converted to other currencies with minimal fees. Converting money with cryptocurrency is
simple and fast.

5. It is Decentralized

As previously said, cryptocurrency is decentralized, which means that the currencies are
controlled by the developers. Decentralization aids in the avoidance of blockchain
monopolies. It also holds things in check so that no one person can control the coin's flow or
value. Decentralization, on the other hand, has both benefits and drawbacks, as seen below.
6. Fast Fund Transfers

International and domestic cryptocurrency transactions are lightning quick. This is because
the verification takes very little time to complete. After all, there are few obstacles to
overcome.

Cons of Cryptocurrency:

1. Is simple to use in Illegal Transactions

The government cannot track down a user or monitor their data due to cryptocurrency's high
degree of privacy and protection. On the dark web, cryptocurrency has been used to conduct
several illegal transactions. It has also been used to launder money more effectively while
concealing the source of the funds.

2. Financial Losses as a result of Data Losses

While cryptocurrency is impenetrable and practically unhackable, making it safer than a

bank, it cannot be recovered if the user loses the private key to their wallet. The wallet, along
with the cryptocurrency, will be locked, and the user will lose money.

3. Decentralization of Power

Decentralization has both benefits and drawbacks. For the same purpose, it's beneficial to
keep it decentralised; the currency remains in the hands of a single individual. Since people
are corruptible, the cryptocurrency holder may manipulate the price of the cryptocurrency to
cause significant price fluctuations.

4. Susceptible to Cyber-Attacks

Even though cryptocurrency is extremely stable, exchanges are not. To process correctly,
most exchanges store user wallet data. Hackers could steal this information, allowing them
access to the user's accounts.

5. There will be no Refunds or Cancellations

The cryptocurrency cannot be recovered or canceled by the sender if there is a disagreement
between the parties involved, or if funds are sent to the wrong wallet address by accident. It
can then be used by the receiver to defraud the sender of funds. Many people may use this to
defraud others of their capital.

Is it legal to trade cryptocurrencies in India?

As the popularity of cryptocurrency grew in China and spread across Asia, India became one
of the most active users of cryptocurrency as a major means of the online transaction. India's
federal government decided to prohibit cryptocurrency trading at a time when the currency's
acceptance was at an all-time high in the nation.

The Reserve Bank of India (RBI) is particularly concerned about the safety of investors. It is
concerned about the anonymity of cryptocurrency transactions as well as the currency's lack
of intrinsic value because it is not backed by cash.

According to the government, this could open the door to a new level of scamming and
internet fraud. Furthermore, as more transactions occur both domestically and internationally,
more use cases will emerge, potentially boosting cryptocurrency's intrinsic value.

While the RBI barred commercial banks from providing services to crypto traders and
exchanges in 2018, the Supreme Court of India overturned the ban in March 2020 after much
petitioning, just as the world was being struck by the coronavirus pandemic.

Much of India was placed under lockdown and movement restrictions during this period. This
perception has fueled a resurgence in the use of cryptocurrency in the nation.

What is Dogecoin and How does it work?

Dogecoin is a digital currency that was created in 2013. Doge was designed to be a
welcoming introduction to the idea of cryptocurrency for the general public/layperson, with a
'fun and pleasant' brand picture. The dog Shiba Inu, who became known as the DOGE meme,
was the voice of DOGE. It was dubbed a "meme cryptocurrency."

Dogecoin, on the other hand, rose in popularity as a result of its large community, which
effectively made DOGE look like the currency of the future. Elon Musk, a well-known
celebrity, has endorsed Dogecoin and made jokes about it. DOGE, more than anything else,
aided in raising awareness of the meaning and significance of blockchain technology and
cryptocurrency among millions of people all over the world. Dogecoin is already one of the
most widely used cryptocurrencies. The Dogecoin price is Rs. 25 at the time of writing this
post.

In India, where can I buy Dogecoin?

Purchasing and selling cryptocurrencies in India was illegal before the Supreme Court of
India agreed to legalize it in 2018. Since then, India's crypto industry has exploded, with
millions of Indians investing in cryptocurrency. Buying cryptocurrency can be a complicated
task, but there are crypto exchanges that make it relatively simple for a layperson to do so.
Crypto exchanges, such as Binance or Robinhood, are apps or websites that allow regular
people who aren't familiar with trading to invest in crypto in a relatively simple way by using
their fiat currency. Dogecoin can be purchased in India on a variety of exchanges, including
Coinswitch Kuber, WazirX, and CoinDCX.

Pros and Cons of Dogecoin

Pros of Dogecoin:

1. Transaction fees for Dogecoin are relatively low as compared to Bitcoin, according to
doge price predictions. In addition, the transaction is much quicker, taking just about a
minute.

2. Dogecoin is commonly used as a tipping device and an ideal mode of payment for online
casinos and cryptocurrency gaming due to its low value.

3. Unlike Bitcoin's SHA256 proof-of-work consensus, Dogecoin can be mined using FPGA
and ASIC devices with less energy usage, as compared to Bitcoin's high-power mining
rigs.

4. Dogecoin's uniqueness is due to its large and lively culture, which distinguishes it from
other cryptocurrencies.

Cons of Dogecoin:
1. Although Dogecoin is thought to be a safer alternative, it is still in its early stages in terms
of mainstream applications. Nonetheless, with business moguls like Elon Musk and
celebrities like Gene Simmons and Snoop Dog showing interest in cryptocurrency, it
could find more practical uses.

2. Even though Dogecoin has a large and active community, there have been no significant
technical advancements or advances since 2015. This could be seen as yet another
disadvantage. Dogecoin's value increased despite the lack of updates, hitting an all-time
high in February 2021.

The Reserve Bank of India has issued a statement on Virtual Currencies and the
prohibition of Private Cryptocurrency

The first instance of skepticism against cryptocurrency dates back to December 24, 2013,
when the RBI issued a press release warning users, holders, and traders of virtual currencies
such as Bitcoins, litecoins, bbqcoins, dogecoins, and others, among other things, about the
possible financial, operational, legal, consumer safety, and security risks they face. The main
concerns raised were that-

a) there is no approved central body that oversees such payments, and there is no existing
mechanism for dealing with customer complaints, conflicts, chargebacks, and other
issues that arise as a result of the lack thereof.

b) digital wallets are vulnerable to losses due to hacking, password loss, access credential
compromise, malware attacks, and other factors;

c) the seriousness of the danger associated with the high volatility in the value of virtual
currencies;

d) the potential for illicit and illegal activities, as well as unintended non-compliance with
anti-money laundering and counter-terrorist financing (AML/CFT) regulations.

The Inter-Ministerial Committee has introduced several Bills

The Centre established an Inter-Ministerial Committee ("IMC") on November 2, 2017, which

introduced two bills. Neither of these bills, however, became law.
The Crypto-token Regulation Bill of 2018 was the IMC's first recommendation ("First Draft
Bill"). The IMC's initial solution did not lean toward an outright ban, and it was not chosen
on the basis that it was a severe method. It suggested that you:

a) should prohibit persons dealing with crypto token activities from falsely claiming that
these items are not securities or investment schemes or offering investment schemes,
and

b) control virtual currency exchanges and brokers where sale and purchase may be
permitted.

However, the radical reforms included in the First Draft Bill were never implemented.
Instead, the Bill to Ban Cryptocurrencies and Regulate Official Digital Currency (Second
Draft Bill) was presented. It suggested that virtual currencies be prohibited from being used
as legal tender. Mining, purchasing, keeping, sale, trading in, issuance, disposal, or use of
cryptocurrency would also be prohibited in the nation.

Imposition of ban on Private Cryptocurrency

The RBI placed a significant ban on dealing in virtual currencies in its circular dated April 6,
2018 - Prohibition on Dealing with Virtual Currencies ("RBI Circular"). As a result, private
individuals or companies dealing with virtual currencies that needed help from such
institutions were effectively barred from continuing their operations.

It was also stated that controlled entities that already rendered such services must terminate
the relationship within three months of the RBI Circular's publication. The virtual currency
exchanges experienced a major setback as a result of this ban, and they were unable to
continue operating.

The Supreme Court issued a landmark decision on Private Cryptocurrency

On March 4, 2020, the Hon'ble Supreme Court lifted the ban imposed by the RBI Circular in
Internet and Mobile Association of India v. Reserve Bank of India ("Judgement"), with a
three-judge bench consisting of Justices Rohinton Nariman, Aniruddha Bose, and V.
Ramasubramanian.
The court looked at the case primarily through the purview of Article 19(1)(g) of the Indian
Constitution, which guarantees freedom to practice any career or carry on any occupation,
trade, or service, as well as the proportionality doctrine.

Bill 2021 on Cryptocurrency and Official Digital Currency Regulation

The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, is expected to be
introduced in the next Lok Sabha session ("New Bill"). The New Bill aims to create a more
conducive environment for the development of the RBI's official digital currency. In addition,
the New Bill aims to ban all private cryptocurrencies in India. It does, however, allow for
certain exceptions to support cryptocurrency's underlying technologies and applications.

Main issues with the New Bill

Although the New Bill recognizes a long-standing grey area in virtual currency legislation
and encourages the adoption of digitalization, it proposes to ban private currencies wholly.
To put this in context, it's worth noting that the Indian population has shown a strong interest
in virtual currencies, with India accounting for between 2 and 10% of the global virtual
currency market worth US$430 billion until recently. Given a large number of virtual
currency investors in the world, there is bound to be some concern. The new bill should give
them a six-month grace period to liquidate their properties. The manner and mode of such
liquidation, however, remain a mystery. The most likely outcome would be the full
destruction of virtual currency units.

The RBI has repeatedly emphasized the potential for virtual currencies to be used for terrorist
funding, money laundering, and other illegal activities. However, if the New Bill prohibits
the use of private currencies, it could create an illicit market where legitimate investors are
forced to work in unregulated environments. Furthermore, the primary aim of enacting
legislation is to create a technologically safer climate for dealing with virtual currencies.
However, because the state-owned cryptocurrency will be designed to perform the same
functions as other cryptocurrencies, it will be subject to the same risks as other
cryptocurrencies. As a result, even the introduction of a national digital currency may not be
enough to reduce the risk.
It's also worth noting that if there is only one digital currency, the RBI would have full
control over it. There will also be concerns over whether or not international investors will be
able to invest in the Indian digital currency, as well as how it will be governed. As a result,
the looming possibility of foreign investors being able to invest in the Indian digital currency
while Indian investors' ability to invest in foreign cryptocurrencies is largely limited, creates
the potential for further complications. The introduction of a policy that comprehensively
recognizes the benefits and disadvantages is urgently needed.

Conclusion

It has been identified that there is a lack of clarification in India when it comes to
cryptocurrency regulation. A well-structured and complex approach to cryptocurrency
regulation is needed, with due respect for the interaction of law with its subjects – in this
case, crypto-exchanges, investors, and, most importantly, the people working in the field. A
regulation with such a far-fetched impact needs more consideration.

The continued increase in cryptocurrency use has sparked various debates not only in India
but around the world. When it comes to cryptocurrency, the world is divided; there are a few
well-known figures, such as Bill Gates, Al Gore (a Nobel Prize winner), and Richard
Branson, who endorse cryptocurrency as a means of increasing the store value of money.

On the other hand, others are opposed to it, such as Warren Buffett, Paul Krugman, and
Richard Shiller; they call it a Ponzi scheme and a tool for illegal activity.

There will be a debate in the future between regulation and privacy since many
cryptocurrencies have been connected to terrorist attacks. The government will want to
control how cryptocurrencies work; on the other hand, the main focus of cryptocurrency is to
ensure that its users remain anonymous.

It's worth noting that the MEITY's Draft National Strategy on Blockchain, 2021, highlights
the benefits of cryptocurrency. According to the study, blockchain technology offers
transparency, protection, and productivity in business operations, as well as a specific layer of
trust over the Internet, which was first tried for cryptocurrency application Bitcoin. The
Cryptocurrency was also identified as one of the Blockchain's possible applications. As a
result, there is a need for Indian authorities to take a united stance on this issue. The RBI's
policies are not in line with MEITY's findings.
Since we live in a generation where technological advancements are unavoidable, each one
will invariably bring with it new threats. It is important to keep updating the legislation to
keep it up to date with innovations. As the Supreme Court pointed out in its decision, there
must be empirical evidence to support the ban and show that it is necessary – otherwise, there
is a good chance that the right was given under 19(1)(g) will be invoked again in a slew of
lawsuits. As a result, rather than a ban, any potential legislation should seek to mitigate the
risks associated with virtual currencies through effective regulation.

References

1. Pros and Cons of Cryptocurrency, https://www.completecontroller.com/the-pros-and-

cons-of-cryptocurrency/

2. Legality of Cryptocurrency, https://blog.finology.in/investing/cryptocurrency-in-india

3. Meaning of Dogecoin, https://www.republicworld.com/technology-news/other-tech-

news/how-to-buy-dogecoin-in-india-here-is-the-step-by-step-process-you-can-use-to-buy-
doge.html

4. Prons and Cons of Dogecoin, https://cryptocurrencylatestnews.today/advantages-and-

disadvantages-of-dogecoin/
5. Press Release: 2013-2014/1261,
https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=30247
6. Internet and Mobile Association of India V. Reserve Bank of India, Writ Petition (Civil)
No.528 of 2018
7. Draft Banning of Cryptocurrency & Regulation of Official Digital Currency Bill, 2019,
https://www.prsindia.org/billtrack/draft-banning-cryptocurrency-regulation-official-
digital-currencybill-2019
8. DBR.No.BP.BC.104/08.13.102/2017- 18,
https://rbidocs.rbi.org.in/rdocs/Notification/PDFs/NOTI15465B741A10B0E45E896C62A
9C83AB938F.PDF

9. Lok Sabha Bulletin Part – II, General Information relating to Parliamentary and other
matters, http://loksabhadocs.nic.in/bull2mk/2021/29012021.pdf
10. The Virtual Currency Law Review, Law Business Research Ltd, ISBN 978-1-912228-77-
5, November 2018

NAME – DIVYA UPRETI

COLLEGE NAME – K.R. MANGALAM UNIVERISTY, GURGAON

YEAR – 5TH