Cryptocurrency: The Future in India
By Lawfarm Team January 07, 2022
By Ravi Raj
Cryptocurrencies emerged in 2009 after the rise of Bitcoin, created by a pseudonymous developer, Satoshi Nakamoto. Today, the cryptocurrency industry is worth around 3 trillion USD. In India, cryptocurrencies were effectively banned by a circular issued by the Reserve Bank of India in 2018, but ever since the circular's order was reversed in March 2020 by the Supreme Court, the industry is on the rise. According to estimates, cryptocurrency has increased 400% in the last year.
Public opinion is filled with debates and the news cycle is indicating that the government of India is in the process of regulating cryptocurrencies, which has raised many questions about the future of cryptocurrencies in India. Is it worth the investment? Will there be a ban? Should we invest? Etc.
This article aims to provide you with a thorough understanding of the scenario of cryptocurrencies in India and what you can expect from them in the future.
The current state of cryptocurrency in India
Due to an unexpected rise in the trading of cryptocurrencies, the Indian government is in the process of formulating viable laws to prevent the misuse of cryptocurrencies. There are many significant reasons for the need for such regulations:
Firstly, the anonymity and decentralisation of cryptocurrencies empower the user to trade without any interference from a middleman, which also bars government bodies from interfering in cases of fraud. One recent example is the Karnataka Bitcoin Scam, in which a hacker stole bitcoins from a cryptocurrency exchange.
Secondly, the currency is highly volatile and there is no sovereign guarantee behind it. Its nature as an asset is highly speculative. Most currencies are backed by the government; therefore, inflation or deflation can be controlled. In the event of any instability, there is someone to bail you out.
With cryptocurrencies, there is no such bailout mechanism. Its value can grow in a bubble or crash drastically without anyone's being at fault, which makes it highly speculative. The Great Depression of 2008 is a clear example of the consequences of speculative investing when one of the biggest banks in the world, the Leman Brothers, went bankrupt.
Thirdly, and most importantly, we must recognise the fact that blockchain is a fairly new technology and has not matured yet. Today, it is similar to the early days of the internet, Web 1.0. When the internet was slow and only text and hyperlinks were used, Later, the industry grew, and more fair regulations came into force. The same will be true for cryptocurrencies and blockchain.
Early regulations should provide investors with security while also allowing for further experimentation in the field.
Future Expectations from Cryptocurrencies
Early rumours about a complete ban of cryptocurrencies, like a ban in China, created a fall in the cryptocurrency market of India. However, many government officials later clarified that the regulations only prohibit cryptocurrencies from being used as a currency and that they can be traded as an asset class. But still, there is no official statement. The bill to regulate cryptocurrencies was supposed to be presented in the winter session, but the government is taking its time to consult more experts as the market is rapidly changing.
But the fact remains that India holds a very large market for cryptocurrency traders. Today, India has the largest number of cryptocurrency holders in the world, at around 10.7 crores. It's highly unlikely that there will be a complete ban.
The government is planning to launch its own cryptocurrency with a value equivalent to the Indian rupee. The other private cryptocurrency will stay, but only as an asset class to trade. In any case, cryptocurrency is not only a currency, it's an opportunity. Just like the early days of the internet brought the dot-com boom, cryptocurrencies along with the upcoming 5G and 6G technologies have the potential to bring great opportunities for India.
Cryptocurrencies present an optimistic future for not only India but the whole world. Regulation of cryptocurrency is inevitable and should be supported. But despite its speculative nature and public rumours, 3 predictions can be made on the basis of the current scenario in India: cryptocurrencies We will see more use, more misuse, and more rules in the future. One must be informed and cautious before investing.
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