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Cryptocurrency in India: Embracing the Digital Future of Economic Transactions
Cryptocurrency is decentralized digital money that is based on blockchain technology and secured by cryptography. To understand cryptocurrency, we need to understand three basic terminologies – blockchain, decentralization, and cryptography.
In simple words, A blockchain is a distributed database that is shared among the nodes of a computer network. A blockchain stores information electronically in a digital format. Blockchains are best known for their crucial role in cryptocurrency systems, such as Bitcoin, for maintaining a secure and decentralized record of transactions.
Centralized money refers to regular money, which is governed by authorities like the Reserve Bank of India. Decentralization in cryptocurrency means there is no similar authority that can be held responsible for supervising the rise and fall of a particular cryptocurrency.
Cryptography is the method that secures data from unauthorized access by the use of encryption techniques.
How Does Cryptocurrency Work?
Cryptocurrency can be generated from mining, buying, storing, selling, and also from investing.
Cryptocurrencies are generated through a process called “mining.” Users today can buy cryptocurrencies from central exchanges, brokers, and individual currency owners or sell them to them. Cryptocurrencies like Bitcoins can be easily transferred from one digital wallet to another using only a smartphone.
Many governments worldwide are focused on digital currencies and transactions these days. Even some people do not want their money and transactions to be regulated. This resulted in more innovation in a new currency, cryptocurrency, one of the most sophisticated, ambiguous, and regulation-free currencies.
Some also claim that cryptocurrencies eliminate the need for middlemen such as banks, it would have a detrimental influence on the global economy, particularly in underdeveloped countries.
There are many advantages in dealing with cryptocurrencies. They are private and secure. They are decentralized, immutable, and transparent. They are a hedge against inflation.
Disadvantages include that they are prone to risks, not widely understood, and legality.
Cryptocurrency in India
Until the 2022 Union Budget announcement, the fate of cryptocurrency in India was largely undecided. In the Budget, the Indian Finance Minister’s announcement on levying a 30% tax on gains on the transfer of virtual digital assets, which includes cryptocurrency, was initially seen as an endorsement of cryptocurrencies. There have also been speculations that a ban on private cryptocurrencies would follow the launch of the RBI’s own official digital currency.
Impact of cryptocurrency on the Indian economy
Cryptocurrency enhances transparency, where every transaction can be traced back to the source.
The crypto industry currently employs about 50,000 individuals. As per a report, the industry is poised to see massive employment opportunities, pegged at over 800,000 by 2030. India already has a strong talent pool of Fintech professionals and IT experts. Additionally, the talent is available at cost-effective rates.
As mentioned earlier, India already has a strong base of IT professionals. The collaboration of IT and the financial sector can bring endless possibilities in terms of business opportunities and overseas cash influx.
Cryptocurrency transactions are both time and cost-effective. The transactions are carried out between the sender and receiver without the need for a third party, making the transactions instantaneous. With the government proposing the creation of a single, officially recognized cryptocurrency, the dependence on third-party, private, and foreign-based cryptocurrency will be eliminated.
Conclusion
The cryptocurrency market cannot be ignored, and the possibilities are endless. India has one of the highest numbers of crypto users. Even the government has acknowledged the potential of cryptocurrency as a means of payment, thereby proposing a bill to issue and regulate RBI-backed cryptocurrency in the country. In the future, we can see cryptocurrency becoming the primary player fueling the country’s economy.
References
- Nakamoto, S. (2008). Bitcoin: A Peer-to-Peer Electronic Cash System.
- Tapscott, D., & Tapscott, A. (2016). Blockchain Revolution: How the Technology Behind Bitcoin Is Changing Money, Business, and the World. Penguin.
- Narayanan, A., Bonneau, J., Felten, E., Miller, A., & Goldfeder, S. (2016). Bitcoin and Cryptocurrency Technologies. Princeton University Press.
- RBI publications and circulars related to cryptocurrency and digital currency.
- Government of India. (2022). Union Budget Speech.
- Zohar, A. (2015). Bitcoin: under the hood. Communications of the ACM, 58(9), 104–113.
- Casey, M. J., & Vigna, P. (2018). The Truth Machine: The Blockchain and the Future of Everything. St. Martin’s Press.
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