Cryptocurrencies in India

Cryptocurrencies are created using cryptographic techniques that enable people to buy, sell or trade them securely. It typically does not exist in physical form (like paper money) and is typically not issued by a central authority.

What is cryptocurrency?

A cryptocurrency is a form of payment that can circulate without the need for a central monetary authority such as a government or bank. A cryptocurrency is a medium of exchange that is digital, encrypted and decentralized. Cryptocurrencies typically use decentralized control as opposed to centralized digital currency and central banking systems.

Cryptocurrencies in India:

In 2018, The RBI issued a circular preventing all banks from dealing in cryptocurrencies. This circular was declared unconstitutional by the Supreme Court in May 2020.

Recently, the government has announced to introduce a bill; Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, to create a sovereign digital currency and simultaneously ban all private cryptocurrencies.

In Budget 2022, finance minister Nirmala Sitharaman said the transfer of virtual digital assets would attract a 30 percent tax. The government has not made crypto legal under the Finance Bill, but it made the gains from it as taxable.

The government also plans to issue a digital currency following the recommendations of the Reserve Bank of India (RBI).

Types of Cryptocurrency:

Bitcoin is the first and the most popular and valuable cryptocurrency. It was created by Satoshi Nakamoto, a pseudonymous person or team who outlined the technology in a 2008 white paper.

The competing cryptocurrencies that were created as a result of Bitcoin’s success are known as altcoins. Some of the well known altcoins are as follows:

  1. Litecoin
  2. Peercoin
  3. Namecoin
  4. Ethereum
  5. Cardana

Bitcoin currently represents more than 60% of the total value of cryptocurrency.

Advantages of Cryptocurrency:

Cryptocurrency has the following advantages:-

  • Cryptocurrencies make it easier to transfer funds directly between two parties, without the need for a trusted third party like a bank or a credit card company
  • It is a cheaper alternative compared to other online transactions
  • Payments are safe and secured and offer an unprecedented level of anonymity

Disadvantages of Cryptocurrency:

Cryptocurrencies have the following disadvantages:-

  • Cryptocurrencies pose risks to consumers
  • Payments are not irreversible
  • Cryptocurrencies are more vulnerable to criminal activity and money laundering
  • A central bank cannot regulate the supply of cryptocurrencies in the economy

How Do You Get Cryptocurrency? 

Any investor can purchase cryptocurrency from popular crypto exchanges such as Coinbase, apps such as Cash App, or through brokers. Another popular way to invest in cryptocurrencies is through financial derivatives, such as CME’s Bitcoin futures, or through other instruments, such as Bitcoin trusts and Bitcoin ETFs.

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Note: This Post was last updated on February 27, 2022

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Sunita

Founder & Director | COO & CHRO at eTaxFinance | Content Writer at eTaxFinance Blog | Department Head for Intellectual Property & Startup Team | Head-Corporate Strategy and Planning