The new and famous term in the financial world is Cryptocurrency. It has gained the attention of all sections of society and what was previously shrouded in mystery has now begun to gain light. Looking at the crypto ecosystem, it’s hard to fathom how far we have come in Information and Communication Technology (ICT). With most of us, shifting from fiat currency to Digital Payments took some time. However, with the push of the government under ‘Digital India’ and ease of transactions we have successfully incorporated digital payments into our everyday lives. Of late, Cryptocurrency — almost synonymous with Bitcoin, has been a mainstay on media.

Cryptocurrency is a digital currency that works on Blockchain Technology and is gaining traction all across the world. There are around 2160 cryptocurrencies currently but some are more popular than the others like Bitcoin, Ethereum, Dogecoin, Litecoin, etc. Bitcoin, the most popular cryptocurrency was founded in 2009 by a person or group of persons called Satoshi Nakamoto. Cryptocurrency regarded as the future of transactions is in a decisive state across the globe. While recently the country El Salvador became the first country to legalize cryptocurrency, several other countries have kept their views open with it. India too is in a decisive state in this regard. The central government is aiming to bring in a new law for the regulation of cryptocurrency. The RBI, on the other hand, feels the need to ban all sorts of cryptocurrencies in India. However, in a democratic and neo-liberal state, it is important to leave the economic decisions of the private citizens private only subject to regulation to ensure no irregularities. In this light, the decision of the Central government to introduce regulation in cryptocurrency is most welcome.

Cryptocurrency is still a grey area in the world. Proponents of it go on to say the advantages of it are being a digital ledger of transactions, ease of transactions, limited or no chances of hacking. However, in the process of admiring the new and unknown, it is also imperative to understand cryptocurrency completely. Cryptocurrency has a lot of issues, to begin with. Firstly, this currency is not tangible and legal. Secondly, mining requires large amounts of electricity consumption which is causing power problems in some countries and also contributing greatly to climate change and global warming. Thirdly and most importantly, cryptocurrency works on anonymity. The lack of transparency raises questions of how this can be used for terror financing, money laundering, tax evasion and in this manner pose threat to the sovereignty and integrity of India. Fourthly, cryptocurrency is not bound by a Central bank and its regulations hence, it is not legal. Fifthly, cryptocurrency is only a form of investment and to be precise, a speculative asset. Its volatility has been witnessed over the years and its limited availability makes it exclusive and leads to the shooting of prices with no real value. This was evident during Covid Lockdown, while people’s livelihood was affected greatly, the only increase took place in the value of Bitcoin which has benefitted only the rich who invest heavily in this as an asset. The price of Bitcoin was USD 1 in 2011 and has now reached a staggering USD 60000 in 2021. Converted to INR, the price of one Bitcoin today is 36 Lakh 50 thousand Rupees.

The Middle class and youth have in habit of curiosity tried to trade in Bitcoin. In the assurance of guaranteed increased returns several fake websites and virtual Ponzi schemes have increased conning lakhs of people and looting their hard-earned money without any chance of it being recovered. Bitcoin is to be mined by miners by solving complicated mathematical problems which are far from accessible to the common man. However, due to a large number of brokers, 15 crore Indians own some form of cryptocurrency. This is the highest number in the world and an example of how people are spending money on something just because it is a trend. It is a threat to financial security due to all these dark areas.

Looking closer at how cryptocurrency works, the principle on which it works has interested several people across the globe. Blockchain Technology is a great invention and uses a shared database where information is stored digitally. Information is stored on blocks and once a block is complete it gets chained to the previous block and this process continues. Blockchain technology was first introduced as a research project in 1991 by two researchers, but it was put to use for the first time in the founding of Bitcoin in 2009.

The main takeaways from blockchain technology are, the information once stored is irreversible secure, and decentralized. No one person or group of persons has control over it and hence cannot be hacked or manipulated. Leaving cryptocurrency out of the picture, blockchain technology independently could do wonders for our societies and administration. It has a wide area of applicability in schools, colleges, hospitals, government, police, private companies, etc. which can make information storing, accessing, and linking an easy task. The prominent blockchain applications are secure sharing of medical data, tracking of music royalties, real-time Internet of Things (IoT) operating systems, personal identity security, anti-money laundering tracking system, supply chain logistics monitoring, voting mechanism, advertising insights, original content creation, real estate processing platform. Thus, Blockchain technology has the power to make our lives easier, transparent, secure, and decentralized. I believe if this is adopted at governance at all levels, it will create wonders and make our lives transparent and potentially corruption-free.

On the other hand, some nation-states are also coming up with their own central bank digital currency. The Bahamas recently became the first country in the world to come up with its digital currency named ‘Sand Dollar’. China is in the process of creating its digital currency called e-yuan. It is important to note that unlike cryptocurrencies, which are designed to be anonymous and free of ties to monetary authorities, these CBDCs (Central Bank Digital Currencies) are digital fiat and often an extension of already existing physical currency. CBDCs may or may not be based on blockchain technology and are often cited as a convenience for citizens to carry out digital transactions.

In 2018, The Reserve Bank of India imposed a ban on private cryptocurrency but this was quashed by the Supreme Court. The government of India is currently working on a new law to regulate private cryptocurrency while the RBI has plans of introducing Central Bank-led digital currency (CBDC). Thus, several fears of anonymity, cryptocurrency being used for anti-state activities will be regulated and limited.

I completely support the steps taken by the Central government in the regulation of private cryptocurrency. I am also excited about Blockchain and various innovative use cases to solve “Indian” problems — Blockchain technology is surely the future of humankind.