Digital Currency in India
Created on 20 May 2022
Wraps up in 5 Min
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Updated on 13 Sep 2023
The current news cycle about a new cryptocurrency bill scheduled to be proposed in parliament has caused a lot of uncertainty. Initially, it sparked a wave of panic trading among cryptocurrency buyers as fears of a probable ban grew.
What does the future hold for cryptocurrency in India? Will India truly outlaw digital currency or cryptocurrency? What exactly is the measure that the administration intends to introduce? Should I keep my cryptocurrency investments? These are just a few of the concerns that millions of Indians have as they continue to invest and trade in cryptocurrencies.
What is Digital Currency and its Future in India?
Digital currency – cash, money, or any other digital exchange medium – is a type of money exclusively in digital or electronic form. Only specialist software, mobile, computer programs, or specific digital wallets are used to transact or store it, and transactions require internet connectivity.
Most nations' financial systems use electronic equivalents of fiat currency. Unlike fiat currencies, which have a physical structure (paper money), digital currencies, such as cryptocurrencies, do not. Digital currencies are all cryptocurrencies, but not all cryptos are digital currencies.
Following its spectacular price changes and explosion in cryptocurrency trading, digital currencies like Bitcoin, Ethereum, and the meme coin – Dogecoin have been all over the headlines recently. However, what exactly are cryptocurrencies?
Cryptocurrencies are often not produced by a central body and are safeguarded by cryptography, as the name implies. Many cryptocurrencies use blockchain technology, a decentralised ledger of transactions spread over a network of computers that is impossible to hack or manipulate.
Bitcoin, the globe's first decentralised cryptocurrency, was created in 2008 by the enigmatic Satoshi Nakamoto and has seen significant price fluctuations. After the pandemic quarantine and worldwide economic upheaval, its value soared in 2020, peaking at more than $64,000 in April 2021, before dropping to slightly around $40,000 in September 2021.
The crypto fever is quite visible in India. According to research by Analytics Insight, nearly 10 million Indians had invested in cryptocurrencies, totaling $6.6 billion by May 2021. Inside the blockchain and crypto industry, there are over 350 firms.
Many digital exchange platforms, including CoinDCX, CoinSwitch Kuber, Unocoin, WazirX, and many others, are projected to see a boom in crypto investors in India. This is given the possibility that the Indian government would outlaw cryptocurrency.
Cryptocurrencies or Digital Currency Status in India
In India, cryptocurrencies are not outlawed. Cryptocurrencies may be bought, sold, and traded by anybody. However, there is presently no regulatory framework in place in India to control the operation of cryptocurrencies.
The ministry is still looking at how distributed network technology may be used in financial services and how digital currencies can be regulated.
Were cryptocurrencies prohibited in India?
The Reserve Bank of India (RBI) barred all licensed banks and other financial organisations from trading with digital currencies in 2018, citing worries about unlawful activity and a potential danger to financial stability.
The Finance Minister also issued a statement stating that the ministry does not see cryptocurrencies as legal cash or coins and that all efforts would be made to prevent the use of this digital currency in financing illicit activities to create a healthy crypto environment. Furthermore, it will not be included in the payment network by the government.
The S.C. Garg Committee suggested a prohibition on all private digital currencies in February 2019, claiming that private cryptocurrencies could not serve as a currency and had no inherent value.
Their unpredictable value swings are inconsistent with the purpose of currency and cannot be used to substitute fiat currencies. The committee also advocated a 10-year prison sentence and harsh fines for anybody in India trading with cryptocurrency.
The Supreme Court of India rejected the RBI's 2018 letter in March 2020, ruling the
restriction was unlawful. The RBI declared in May 2021 that financial institutions would be allowed to support cryptocurrency exchanges. Banks including ICICI Bank, HDFC Bank, Yes Bank, and the State Bank of India have resumed their bitcoin exchange trades.
Bill on Cryptocurrency
Cryptocurrencies have been booming in India after the Supreme Court overturned the RBI's crypto prohibition. The government implemented the Cryptocurrencies and Control of Authorized Digital Currency Bill, 2021, in response to the increased interest in cryptocurrencies.
The law suggested banning all private currency in India, with few exceptions, to encourage blockchain technology, crypto, and applications. Additionally, the RBI will develop an official digital currency.
The new proposal is significant in that it covers both finance and technology. It is an excellent indicator that the government will take the information to comprehend advanced technologies before making a big decision and taking into account stakeholders' opinions.
The government is unlikely to prohibit cryptocurrencies outright, but it may impose harsher restrictions and regulations.
With tech-friendly lawmakers like Ashwini Vaishnav and Rajeev Chandrasekhar to the freshly enlarged Union Cabinet, the Indian crypto community will benefit from more favourable regulations.
What’s the similarity between stock traders & crypto traders?
Both are clueless about where did their money go. 🐒
Digital Currency in India
RBI Governor Shaktikanta Das has stated that the central bank is working on a digital currency. The RBI wants to use distributed ledger technology to improve financial systems and is willing to back a central bank digital currency, CBDC.
CBDC is a digital currency issued as a tender by a central bank. It behaves similarly to fiat cash and may be exchanged for fiat currency one for one. Cryptocurrencies such as Bitcoin, Ethereum, and Solano, on the other hand, are not legal tender.
Is India's Digital Currency Future in Jeopardy?
By seeing the sheer level of interest, it is apparent that market emotions support the notion that digital currencies are still the way of the future. Yet, the government of India has failed to issue a regulatory framework or a clear mandate.
It's worth noting that nations that have regulated cryptocurrencies, like Singapore, the United States, and others, have gone through several stages, whereas India is just getting started. It's the "wait and see" strategy. Adopting cryptocurrencies is difficult at first, but banks and governments will eventually have to accept them because they cannot stand to fall beyond technical innovations.
The Indian government keeps a close eye on the crypto industry and enables citizens to experiment with blockchain and cryptocurrencies. The government has stated that it is not closing down all alternatives but is taking care to prevent their exploitation. Perhaps a new structure for cryptocurrency rules will emerge. With Quest Cryptocurrency Course, dive deeper into the how's, why's, and what's of digital currency with ease.
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