Cryptocurrency is a form of payment that can be exchanged online for goods and services. Many companies have issued their own currencies, often called tokens, and these can be traded specifically for the good or service that the company provides. Think of them as you would arcade tokens or casino chips. You’ll need to exchange real currency for the cryptocurrency to access the good or service. Cryptocurrencies work using a technology called blockchain. Blockchain is a decentralized technology spread across many computers that manages and records transactions. Part of the appeal of this technology is its security.
How cryptocurrency works
People might use cryptocurrencies for quick payments and to avoid transaction fees. Some might get cryptocurrencies as an investment, hoping the value goes up. You can buy cryptocurrency with a credit card or, in some cases, get it through a process called mining. Cryptocurrency is stored in a digital wallet, either online, on your computer, or on other hardware.
Before you buy cryptocurrency, know that it does not have the same protections as when you are using Indian Rs. Also know that scammers are asking people to pay with cryptocurrency because they know that such payments are typically not reversible.
If you believe in blockchain technology, cryptocurrency is a great long-term investment. Bitcoin is seen as a store of value, and some people think Bitcoin can replace gold in the future. Ethereum, the 2nd largest cryptocurrency by market cap, also has huge growth potential as a long-term investment.
Thus cryptocurrency is a revolutionary thing in the current market it can literally change the future depending upon the usage of the individual.
The rise of Cryptocurrencies among youth – Pros and Cons
Cryptocurrencies are the currencies encrypted or encoded through cryptography. In other words, it is a digital currency in which encryption techniques are used to regulate the generation of units of currencies. A cryptocurrency is created by miners. Only a minor has the authority to validate a transaction. A transaction until verified can be forged. After being confirmed by a minor it becomes a part of the blockchain and cannot be reversed or forged.
The first ever cryptocurrency – BITCOIN – was founded/invented by the group or individual named as Satoshi Nakamoto in 2008 and introduced to the world in 2009. Bitcoin is a peer-to-peer electronic cash system which requires no bank or regulatory authority. In this never-stopping world, this has been an easy and favourite way of monetary transactions, especially among youths. Here are some pros and cons associated with cryptocurrencies.
- The transaction parties can remain anonymous if they wish to. These transactions are pseudonymous in nature i.e. neither the transactions nor the accounts are connected to the real world identities. A 30-digit address is received that consists of alphabets and numbers coded in a certain way.
- The transactions are highly secured and encrypted. They cannot be reversed once completed.
- It eliminates the middleman fees.
- These are not manipulated by any governmental or central authority and are completely decentralised.
- There is a possibility that they may eliminate the banking industry up to some extent in the coming future.
- Since there is no central authority involved, this is still widely used for illegal transactions and antisocial acts.
- It is highly dependent on technology so the risk of operational glitches always remain the same.
- Fraud risk; as bitcoin is encrypted with a Private Key to verify owners and register transactions, hackers tend to sell false bitcoins.
- Market Risk; the value of Bitcoins keep fluctuating on day to day basis.
- Tax Risk; a bitcoin is still ineligible to be included in any kind of tax advantages. This hampers the whole purpose of investment.
Types of cryptocurrency
|Name||Market Cap (in $)||Per Token Value (in $)|
|Bitcoin cash||8.9 billion||513.45|
|Bitcoin SV||3.5 billion||187.22|
|Binance Coin||6.8 billion||44.26|
Cryptocurrency Regulations In India
Cryptocurrencies are not legal tender in India. While exchanges are legal in India due to the absence of a robust regulatory framework, a protracted licensing process makes it very difficult for certain cryptocurrency services and innovative technologies to operate. Although there is currently a lack of clarity over the tax status of cryptocurrencies, the chairman of the Central Board of Direct Taxation has said that anyone making profits from Bitcoin will have to pay taxes on them. Other Income Tax Department sources have suggested that cryptocurrency profits should be taxed as capital gains.
Cryptocurrency Exchange Regulations
Cryptocurrency exchange regulations in India have grown increasingly strict. While technically legal, in 2018 the Reserve Bank of India (RBI) banned banks and any regulated financial institutions from “dealing with or settling virtual currencies.” On 14 Jan 2018, RBI confirmed that it had not issued any licenses or authorisations to any entity or company to operate a scheme or deal but had issued warnings about dealing in virtual currencies and introduced a requirement for firms to unwind or exit their positions. It also confirmed that new prohibitive regulations were planned. The sweeping regulation prohibited the trade of cryptocurrencies on domestic exchanges and gave existing exchanges until 6 July 2018, to wind down.
In 2020, a landmark Supreme Court decision ruled the ban unconstitutional, reversing the prohibition and allowing exchanges to reopen
Future Cryptocurrency Regulations
While there were signs in 2017 and 2018 that India was considering less prohibitive cryptocurrency regulations, recent reports indicate a change of course. In July 2019, an interministerial committee recommended a blanket ban on cryptocurrencies except for a proposed official digital currency. The leaked, alleged draft bill suggested prison time for those who “mine, generate, hold, sell, deal in, issue, transfer, dispose of, or use cryptocurrency in the territory of India.” Although that draft bill did not make it to the parliament floor, India’s aversion to cryptocurrency continues and, in late 2020, leaks suggested that the government was drafting a new bill to ban cryptocurrency trading. While it has come down hard on cryptocurrency from a regulatory perspective, India’s government has stated that it is open to exploring the potential of blockchain technology to enhance its financial services industry.