Instead of restricting its use, the Indian Government could take use of this chance to break down the boundaries associated with fiat currency and establish itself as a global cryptocurrency investment centre, attracting a large amount of business and investment. The decision of the Indian Government to launch the Central Bank Digital Currency, unlike cryptocurrency, within the regulated framework in several phases is the most desirable option
The cryptocurrency market is predicted to increase at a CAGR of 7.1 per cent from $1.6 billion in 2021 to $2.2 billion in 2026. Bitcoin tokens account for close to 80 per cent of that value. The cryptocurrency ecosystem has increased phenomenally over the years. From a technical standpoint, cryptocurrencies have a well distributed, decentralised network that operates on a peer-to-peer mode. The first Bitcoin blockchain block was mined on January 3, 2009, and on January 12, 2009, Satoshi Nakamoto transmitted 10 Bitcoins to Hal Finney, marking the beginning of the Bitcoin currency. Despite the fact that bitcoin is polarising, the blockchain technology that underpins it has functioned admirably, and in both the financial and non-financial sectors, it has a wide range of uses.
The issue of legal regulation of cryptocurrency exists all across the world. There are no specific regulators that evaluate and control transactions and value transfer within the network. Cryptocurrencies are supported by a peer-to-peer network based on blockchain technology that is safe and unhackable. Financial transactions and value transfers between any two parties can be carried out directly, regardless of their form and without the third party engagement using digital technology. The ability of blockchain technology to solve the problem of double-spending is what makes it valuable in banking applications.
A digital token consists of a digital file that can be reproduced or falsified, therefore, it is possible that the same digital token may be spent not only once but more. For speed, scalability and efficiency, cryptocurrencies rely on the open internet. The lack of confidence between exchange partners is taken care of by public-key cryptography procedures utilised to enable money transaction settlements.
Trading in cryptocurrency, including bitcoin, was forbidden, according to an RBI circular dated April 06, 2018, addressed to banks and other financial organisations. As a result, there was no dealing between the buyer and seller when it came to bitcoin or crypto assets Furthermore, the authorities had called attention to the dangers of virtual currencies. The Supreme Court in its March 2020 ruling encouraged crypto acceptance in India.
Despite the fact that the legal position of Bitcoin varies greatly from country to country, there are some legislative limits on the use of virtual currencies in India. Although Bitcoin is not regulated by the RBI, there are 11 exchange platforms in India where it can be traded. Bitcoin is becoming increasingly important, but only to those who see it as a wise- or entertainingly risky-investment. The vast majority of people use Bitcoins as a means of profit rather than as a form of payment. Instead of restricting its use, the Indian Government could take use of this chance to break down the boundaries associated with fiat currency and establish itself as a global cryptocurrency investment centre, attracting a large amount of business and investment. We have reached the point where the cryptocurrency world is beginning to influence economic calculations in a demand and supply narrative.
The topic of cryptocurrency offers numerous research options, and numerous investigations must be completed in order to provide scientific information. The relationship between real financial regulations and the legal status of implementing cryptocurrency platforms should be investigated further from multiple angles. Bitcoin appears to have encountered numerous roadblocks, and its numerous applications in everyday life have presented distinct obstacles to the end user community, yet Bitcoin appears to suggest promise for a better future. However, its growth is difficult to forecast.
The Central bank digital money supposed to be released soon as a mass-market digital asset is a well-contemplated move and will benefit the Indian economy. The framework for the final launch, if well implemented, will give a major boost to fintech industry in India. As envisaged, the decision of the Indian Government to launch the Central Bank Digital Currency, unlike cryptocurrency, within the regulated framework in several phases is the most desirable option.
(The writer is associated with Maharaja Agrasen College, Delhi University. She has taught economics and management, with focus on environmental economics)