WHAT IS CRYPTOCURRENCY?
A cryptocurrency is a virtual or digital currency that is designed using the block chain technology (a distributed ledger that records the ownership of a digital asset) to secure and verify financial transactions and to control the creation of new units of a particular cryptocurrency. Most of the cryptocurrencies are not regulated by the central authority and are considered as alternative currencies. Bitcoin is the first decentralized digital currency to be used widely.
USES
Buying goods: Cryptocurrencies are used as a mode of payment for buying goods. There are traders and online retailers like Overstock, Newegg and Microsoft who fully support Bitcoin payments.
Investment: Cryptocurrencies are deemed to be the biggest investment opportunity available to the people who’ve become millionaires. However, it is important to understand that these are high-risk investments as their market value varies like no other assets. Ethereum is the second most valued cryptocurrency after Bitcoin.
Mining: Miners form the most important part of any cryptocurrency system. Like trading, mining is also an investment. They contribute towards solving the complex cryptographic functions that enable the transactions to get recorded in the distributed public ledger, also known as the Blockchain. The more popular a cryptocurrency becomes, the more people try to mine it and the process becomes strenuous. A lot of people have earned resources by mining bitcoins.
Business Payment: Business owners can accept cryptocurrencies as a form of payment from their customers to open up their business to the international marketplace. It also reduces the payment processing fees because it has lower transaction fees than credit cards. This makes the transactions permanent without any questionable chargebacks.[1]
ADVANTAGES AND DISADVANTAGES OF CRYPTOCURRENCY
Advantages:
- There is no restriction on payment for the individuals living under the autocracy of the government. Bitcoin works as an effective financial tool to use as a medium of exchange without government having control over it.
- Many people are engaged in this business as it helps to maintain the confidentiality and anonymity is maintained. It protects identity theft.
- Bitcoin uses complex cryptographic functions so that it cannot be manipulated by any organization or any individual.
- Inflation is absent as no political interference is present to change the order of use of coins and mines in cryptocurrency.
Disadvantages :
- Many individuals are still unaware of the existence of this particular currency that uses complex technology that is difficult for people to adapt and understand.
- Cryptocurrencies are highly volatile in nature. It becomes unpredictable and risky to invest without understanding the methodology and risk factors.
- Cryptocurrencies are still not legalized in many countries. This makes it difficult to transact money all around the world.
- Individuals still face problems in understanding the entire process of cryptocurrency and often become victims of theft and scam by letting other people keep a record of their bitcoins.[2]
IS CRYPTOCURRENCY LEGAL IN INDIA?
India’s interest in cryptocurrency coincided with 2017’s vast rise in prices when 1 Bitcoin surged to nearly $20,000 in valuation. Until then the country had a blurred concept regarding it. The Reserve Bank of India had virtually banned cryptocurrency trading in India by issuing a circular on April 6, 2018 and directed the companies to not deal in virtual currencies or provide services to any person or entity engaged in such practice. This circular was then challenged by the apex court in the case of Crypto v.RBI that lifted the ban imposed by it.
The Internet and Mobile association of India aslo stated that RBI had no right to deny them access to banking channels and carry on this business that was guranteed to them under Article 19(1)g of the Indian constitution.They also pointed out that cryptocurrency didn’t affect the monetory policies neither the circular had officially stopped crypto trading instead it was regulated to control consumer behavior. This decision had been a boon for the global crypto ecosystem that led to more startups in crypto in India and more jobs.
This also led to the vigorous adoption of the blockchain mechanism that became beneficial for the economy in several ways : It improved efficiency in administration, reduced human involvement and streamlined cross-sector interaction. The blockchain-based digital identity management services reduced the use of paperwork and streamlined the verification process, updated legacy systems in a diverse set of industries such as healthcare, insurance, supply chain logistics and retail.The use of cryptocurrencies can be rewarding for the economy but to prevent corruption and illegal trading a law must be enacted with suitable provisions.[3]
[1]https://www.investopedia.com/terms/c/cryptocurrency.asp/last visited9:11pm
[2]https://honestproscons.com/advantages-and-disadvantages-of-cryptocurrency/last visited9:14pm
[3]https://cfo.economictimes.indiatimes.com/news/understanding-the-legality-of-cryptocurrency-in-india/70429373/last visited9:15pm
This Article Written by Amrisha Mitra, 2nd year, BBA LL.B (H) Student of Amity University, Kolkata.
Also Read – The legality of International Application of Bitcoins and Cyber Governance.
