INTRODUCTION
In the year 2009 a developer with the pseudonymous name “Satoshi Nakamoto” introduced the world’s first-ever cryptocurrency known as bitcoin. Soon many cryptocurrencies started to emerge, for example, Litecoin, Namecoin and Swiftcoin. In the year 2010 bitcoin was used to purchase 2 pizzas which resulted in the bitcoin’s first cash value estimation[1].
By the year 2011 due to the untraceable nature of bitcoin, it became the preferred mode of transaction for any illegal activities, especially on the sites hosted on the dark web.[2] This was one of the primary reasons why the governments across the world grew vary of this new technology. Even the hackers from the recent colonial pipeline hack in the USA which took place on the 7th May 2021, demanded the ransom to be paid in bitcoins.[3]
From the year 2012-17 bitcoin steadily increased in value and during this period many businesses relating to cryptocurrency opened in India, for example, Zebpay, Coinsecure, Unocoin, Koinex and Pocket Bits.[4] The value of cryptocurrency in India drastically increased after the 2016 demonetisation.[5]
The RBI during this period had 2 press releases in which it explained how the cryptocurrencies are neither backed by the central bank nor their value is pinned to any form of asset, which leaves their value totally up to speculations and as such isn’t a safe investment.
In the months of October-November 2017, two PIL’s were filed in the Supreme Court; one seeking the ban of buying and selling of cryptocurrencies in India and the other asking to make cryptocurrency regulated[6]. On April 06th, 2018 the RBI released a circular which prevented all forms of banking institutions from dealing in cryptocurrencies and providing services to any entity which deals with them[7]. This abrupt decision had a devastating impact on the Indian crypto Industry, it ultimately resulted in 95% of the jobs vanishing from this industry.
In March of 2020, the Supreme Court struck down the RBI’s banking ban on cryptocurrency calling the April 6th circular to be “unconstitutional”.[8]
PRESENT
The central bank of India is still against the cryptocurrency, however, now after the recommendation of the Supreme Court, the RBI is thinking of other alternatives to outright banning the cryptocurrency. The Ministry of Corporate Affairs has made it necessary for businesses to disclose their cryptocurrency trading and transactions are done throughout the fiscal year.[9] I feel it’s a much better decision as compared to outright banning cryptocurrency. The whole world is slowly adapting to this new technology with countries like El Salvador which went as far as to classify Bitcoin a cryptocurrency as its legal currency[10].
Now India doesn’t need to go that far, however, our government has to understand that cryptocurrency is going to change how the world does business, and as such banning the use of this technology or denying the development of this technology by private entities will place our country in a great disadvantage in the long run.
The concerns that RBI has regarding cryptocurrencies isn’t baseless, there are indeed a lot of risks that cryptocurrencies pose to the general public due to the volatile nature of their value, however, the central bank needs to acknowledge the numerous merits this technology brings to the table. The cash currency that we know and commonly use today – too had numerous risks and liabilities since it was initially introduced, for example, paper money can easily get destroyed, duplicated or get forged and black money mostly is stored in form of cash, and although some of these problems have been solved, many of these problems still exist and the authorities continuously try to find solutions to these problems instead of outright banning cash currency.
If we apply the same effort to the cryptocurrency we can mitigate the risks possessed by the cryptocurrency and be able to fully utilise the merits provided by this technology.
Many Indian freelancing engineers are paid in cryptocurrencies as it is fast and the value of a cryptocurrency, for example, bitcoin, is the same across the world cryptocurrency is facilitating companies across the globe to outsource their work, and cryptocurrency is making it very easy to pay their employees across the world, Indian freelancers are benefiting greatly from it.
FUTURE AND A WAY AHEAD
On January 29, 2021, the government said that it plans on introducing a bill to create a sovereign cryptocurrency and ban all private cryptocurrencies[11]. I feel this is a step in the wrong direction, banning all private cryptocurrencies will simply hinder the development of this technology in our country and we won’t even be able to fully utilize the merits of this technology. We need to remember this is a very new form of currency that is completely dependent on technological expertise and managing that expertise, now we know as a fact that public technology companies have had a long history of lack of technology, mismanagement, corruption and ultimately failure in our country. However, we need to remember one thing, this government-held technology won’t even receive any competition from private players as the government plans on banning all private cryptocurrency, this will be very bad for our cryptocurrency technology and will eventually be outdated and ultimately useless. Cryptocurrency is as safe and advanced as the technology used behind it, although right now the technology used behind them is hardly different, it is a fact that at the rate it’s developing it won’t be the same in the future. The only way Indian crypto will keep up with this growth is through competition, and our government is going exactly in the opposite direction.
Cryptocurrency is inevitably going to bring an economical revolution around the world, and we mustn’t fall behind during this revolution. There are a lot of risks involved in this new technology which is true for any new technology, therefore, simply rejecting cryptocurrency or monopolising this technology will ultimately be a hindrance to the development of the country and its economy.
Author(s) Name: Yash Chandraprakash (Student, NMIMS Bangalore)
[1] Cryptocurrency in India: The past, present and uncertain future, The Economic Times, https://economictimes.indiatimes.com/tech/trendspotting/cryptocurrency-in-india-the-past-present-and-uncertain-future/articleshow/81410792.cms (last visited June 17, 2021).
[2] Seunghyeon Lee and Changhoon Yoon, Cybercriminal Minds: An investigative study of cryptocurrency abuses in the Dark Web, Network and Distributed Systems Security (NDSS) Symposium 2019 (ISBN 1-891562-55-X), https://www.ndss-symposium.org/wp-content/uploads/2019/02/ndss2019_09-1_Lee_paper.pdf.
[3] Colonial Pipeline Paid Roughly $5 Million in Ransom to Hackers, The New York Times, https://www.nytimes.com/2021/05/13/us/politics/biden-colonial-pipeline-ransomware.html (last visited June 17, 2021).
[4] Cryptocurrency in India: The past, present and uncertain future, The Economic Times, https://economictimes.indiatimes.com/tech/trendspotting/cryptocurrency-in-india-the-past-present-and-uncertain-future/articleshow/81410792.cms (last visited June 16, 2021).
[5] Dr. Smt. Mahananda B. Chittawadagi, Impact of Demonetization on Bitcoin-A Study, Volume-V International Management Research Review, IMRR (51), (2017).
[6] Supra Note 4.
[7] Reserve Bank of India, Prohibition on dealing in Virtual Currencies (VCs), RBI 2017-18/154 (Issued on April 6, 2018).
[8] Internet and Mobile Association of India v. Reserve Bank of India, (2020) 10 SCC 274.
[9] Ministry of Corporate Affairs, G.S.R. (E.), (Notified on March 24, 2021).
[10] Lionel Laurent, Will Bitcoin Be El Salvador’s Passport to Riches?, Bloomberg Opinion, https://www.bloomberg.com/opinion/articles/2021-06-16/bitcoin-is-now-legal-tender-in-el-salvador-is-that-really-a-good-thing (last visited June 18, 2021).
[11] Cryptocurrency in India: The past, present and uncertain future, https://economictimes.indiatimes.com/tech/trendspotting/cryptocurrency-in-india-the-past-present-and-uncertain-future/articleshow/81410792.cms, (06/17/2021)
