The modern world is all about witnessing revolutionary changes happening in the very arena of the world including in the field of banking & finance. Technology has paved its way into the world of banking. E-banking facilities including E-wallet facilities are very high on these days and so is with the concept of "Cryptocurrency" or what is commonly referred to as “ Bitcoins".
Let's first understand a little about the "CryptoCurrencies" before discussing further-
1. What do you understand by “Crypto Currency”? Is it real money?
In the general sense, virtual currencies including crypt’s are essentially in the nature of an asset established digitally to be used later as a medium of exchange under which certain records related to the ownership of specific coins are maintained through a digital ledger or in a programmed database using robust cryptography to secure a transaction to record such digital entries & to further regulate added digital coin records for validating the transfer of coin ownership. According to a notable professor of computer science & mathematics, known for his study in virtual currencies, for a currency to qualify as a "Crypto Currency," it has to fulfill the following six criteria given below-
i. The currency doesn't require a central authority i.e. it involves a decentralized authority and its position is sustained through the diffused consensus.
ii. The system holds an overview of cryptic currency units and their ownership.
iii. The system establishes whether new cryptocurrency units can be formulated. And, if the new cryptocurrency units could be designed the system determines the requirements of their origin and how to determine the ownership of these new units.
iv. The possession of the new cryptocurrency units can be proved solely through cryptography.
v. The system enables transactions to be conducted after the ownership of the cryptographic units involves such changes.
vi. In case there are two separate instructions for switching the same cryptographic units are entered at the same time, the system will perform at most one of them.
Essentially by nature, the virtual currencies are unconventional in the sense that they are not physically in existence or legal tender money normally used in circulation, are primarily in use maintaining a distance from the existing banking & governmental institutions and exchanged over the internet.
The first decentralized cryptocurrency was the "Bitcoin" introduced in 2009 by Satoshi Nakamoto using SHA-256, who had a cryptic function as a proof of ownership. Since then several variants have been created namely- Altcoin, Name coin, Lite coin, Peer coin, etc.
2. How do Cryptocurrencies work?
By definition, Cryptocurrency trading is the act of the speculation on the price movements via a CFD(i.e. Contract for differences) trading account for the buying and selling of the underlying coins through an exchange over the computer network.
For trading in virtual currencies, a trading exchange account is required to be created by the full value of the asset to open a position and later to collect the virtual token coins in the CFD account until you take further steps i.e. Buy or sell.
Further, for trading in the currency, you will be required to purchase them if you believe the cryptic currency will rise in the future or may sell them if you think it will get down in near future. Unlike the regular markets, the cryptocurrency markets are decentralized i.e. not issued or regulated by a central authority such as a government but run across a chain of computer networks. And unlike traditional currencies, they exist only as a digital record of ownership. Where one user wants to send a cryptocurrency unit to the other user they send or receive through such a digital wallet. The transaction is not deemed as conclusive until it has been confirmed and added to the blockchain through a process commonly known as mining.
3. The Legitimacy of CryptoCurrency In India-
Owing to several factors such as consumer protection, money laundering activities and a possible risk to market integrity the Reserve Bank of India efficiently cut the ties between the virtual service providers and the economy in the exercise of its powers under RBI Act 1934 and the powers provided under the Payments Settlements Act 2007through a circular in 2018 providing for instructions to not to-
i. Not to trade in virtual currencies ;
ii. Not to facilitate any trade related to assisting any person or entity in dealing with or settling in virtual currencies;
iii. To compulsorily end the association with such persons or entities in case they were already providing such services on commencement of the order;
4. Supreme Court Ruling on Crypto Currencies on April 2020-
After the passing of the order by RBI in 2018, several petitions were filed in the Supreme Court of India challenging the legality of the order passed by the RBI & expressing concerns over the legality of trading in virtual currencies in absence of any central act for the regulation.
Accordingly, a combined petition was filed in the Supreme Court of India by the Internet & Mobile Association of India (IAMAI) a not- for- profit industry body to represent the plea of the digital services entities holding the view that such order was out of the limits of the statutory scope of the powers given to the central bank of India.
However, overruling the decision of the RBI the SC held that the ban was essentially a constraint to the right to practice any profession or occupation as enshrined under Article 19(1)(g) of the Indian constitution. And it questioned whether the ban was sufficiently imposed in "the interest of the general public" under Article 19(g) while adhering to the doctrine of proportionality.
Consequently, the Supreme Court held that” the order passed by RBI in regard to restriction regarding the dealing in virtual currencies is arbitrary in nature, does not contain any reasonable classification distinguishing or defining the exact nature of the virtual currencies and thus, restriction’s imposed are disproportionate & fail to explain the reason for them being a matter against the interest of the public in India”.
5. Conclusion-Where lies the future of the virtual currency in India?
Due to numerous instances of unethical hacking, theft, and fraud, across many nations, some countries have expressly imposed a ban on the trading, though certain countries have chosen to allow their fair trading & use. In case of India, on 4th March 2020, the Supreme Court passed the order of lifting of the restrictions imposed on the cryptic currencies, however, after high-level discussions, the Central Government is planning to bring the new legislation to outlaw the dealings in cryptocurrencies in India and presently considering a draft proposal for the same, providing for most stringent punishment possibly involving a jail term of maximum 10 years and a fine of Rs.25 crores.
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