The last 10 years, India has seen a lot of change in payment, currency and investment system. The concept of Digital India has brought us the “purchase, pay, transfer and save” platforms like Paytm, Mpaisa, etc. and virtual currency or crypto currency like Bitcoin In India.

Now we no longer need to carry the physical cash in our pockets if we have our electronic devices like mobiles, tablets and laptops. Virtual payment accounts, mobile accounts, net banking facilities or plastic cards like Debit and Credit Card are regulated, like they were either issued by banks, or by the NBFCs licensed by RBI or had some intrinsic value i.e. were available on the platforms which dealt in the sale and purchase of commodities, had their physical offices in India, earned revenue and employed thousands of people. Most of them were Prepaid payment instruments like mobile wallets, Debit cards which required prior payment from your Bank Accounts which can only be possible by availability of cash in your account. But the crypto currencies were unregulated and included anonymity like Bitcoin which got introduced in 2008, was unregulated, had huge rise and falls in its value till date, the record of the transactions of the currency is only available with the people who are present on the Blockchain network and can be accessed through consulting the centralized system.

In last 5 years, India witnessed the boom in unregulated trade of virtual currency based on blockchain system. However, RBI was not in favor of crypto currency and issued a circular dated 6th April 2018 which restricted the interface with regular banking system and literally made the trade of bitcoin in India comatose though RBI denied that it never meant to ban the virtual currencies. The reasons for the circular were lack of intrinsic value and regulations, presence of anonymity, lack of physical offices and information regarding VCs transactions and the concerns of customer protection, market integrity and money laundering. The circular was set aside by Supreme Court on 4th March 2020.

What is Crypto Currency?

Crypto Currency is basically digital money which is created by using cryptography technique (a method of converting comprehensible data into complicated codes which are tough to crack) to secure the transactions of currency. The electronic systems of the people who buys or holds crypto currency get interconnected with each other by the transactions of currency and form a blockchain network. Block Chain is a system in which the record of transactions made in Bitcoin or any other Cryptocurrency are maintained across several computers that are linked in a peer to peer network.

Crypto Currency is a virtual currency for investment and trading in which you transform your savings into virtual currency and that currency stays into your virtual account till its use i.e. either, you sell it at crypto currency exchange or to any other wallet holder to get any other form of currency in return which can be fiat currency like Indian Rupee, U.S. dollars or any other form of crypto currency, or use it for purchasing products or availing services which is rarely done in India. However, its rate or value fluctuates at a large level due to its main dependency on market trend i.e. the rate fluctuates with the change in its demand and supply in the market. So, bitcoin or any other crypto currency can be a commodity or an asset in which you invested or which you can use to buy other commodities, or simply a virtual currency in which you can save.

What is Bitcoin?

Bitcoin is one of the earliest crypto-currency introduced in 2008 by Satoshi Nakamoto based on peer to peer network called Blockchain System which is still in use. A Bitcoin used to worth in few thousands in its early stages and now in 2020 it values in lakhs as the Bitcoin value witnessed a huge rise. It is not administered by any central bank. The Developer of the Bitcoin developed a coded white paper called bitcoin by the use of technique of cryptography for the process of creation or mining of the Bitcoin. Bitcoin in India can be purchased from its holders directly or through crypto currency exchanges after making payment in any other currency while using mobile wallet (bitcoin address) on which bitcoins can also be hold or stored with a private key (password) by the use of the devices like computer and smartphones. People can send bitcoin in India to each other wallets easily as a gift or as a product of sale. All the passwords are known by a centralised system to check whether the user is inputting the correct password or not. The bitcoins are limited in number unlike any other currency issued by central banks as Satoshi stated during its introduction that the coin mining would stop when the coins reach 21 Million. The owner of the bitcoin can know the details of the transactions of the bitcoin among its users through the software present in its own computer or mobile as a member of blockchain system. The value of Bitcoin changes as per its demand and supply, if the demand is high and supply is less, the price of Bitcoins rises and if the demand is less and supply is high, the price decreases. The transactional cost involved in the purchase of Bitcoin in India which is paid with the value of bitcoin depends upon the exchange or the user through which the bitcoin is purchased.

What are the Categories of Crypto Currencies Available in India?

There are many categories of Crypto Currencies which are available in India like:

Dash
Monero
Bitcoin
Litecoin
Ethereum
Zcash
Ripple etc.

What are the benefits of Investing in Crypto Currency?

Following are the benefits of the Crypto Currency like Bitcoin in India:

It is virtual currency which is created by codes and thats why it provides sense of security if stored properly and you don’t need to carry it like hard cash.
Bitcoin in India can be used on some international or foreign digital platforms for making fast and easy payments for purchased products and availed services.
Bitcoin in India is an investment with huge returns if purchased and sold at the right time and the minimum amount with which the investment can be done is RS. 500. However, the minimum amount varies as per the exchange through which you buy the bitcoin.
Bitcoin in India have multinational use thats why it can be used for International transactions.
Due to peer to peer system, in which one can directly purchase the currency from holder lead to less transitional cost and avoid intermediaries.
As decentralized crypto currencies have the single common public record of the transactions available on the devices of the Blockchain network which can be accessed by consulting the software so a user can know whether the person trying to sell Bitcoins actually has the Bitcoins or not. Once the seller tries to sell bitcoin, the message will be broadcasted to all in the list of blockchain, so there is no scope of fraud transactions.

What are the risks in purchase and storage of crypto currency?

No matter how profitable it sounds, it has its own risk. Decentralised Crypto Currency has no guarantee whether it will continue to grow in future as its growth depends upon the increase of its demand. Think before investing in this currency if you don’t have the risk-taking capacity. There are also other risks which are described as follows:

Bitcoin Wallet can be attacked by hackers or malware and malicious software. It can be stolen if not properly stored. Generally, the wallets connected with web falls the prey to these attacks. Use latest and strong antivirus, antimalware and firewall software to protect cryptocurrency.
The Exchange which you used to buy or sell bitcoin in India get the full information on the currency stored in your account.
In case the file is stored on laptop, mobile or any other hardware device and if that device got damaged or stolen, then you may lose the cryptocurrency stored on that device as that can be accessed only through the software available on that device.
Ransomware like Trojan Horse can attack the file present on the device and encrypt with the codes. In this case, the attackers can demand the ransom to decode the file to give access to the owner. The wallets that does not require internet are still best for the use.
All the regulated currencies have intrinsic value i.e. they are secured by gold or investment in foreign exchange or loans but the Crypto Currencies lack intrinsic value.
The whole system of cryptocurrency is unregulated and decentralised Crypto Currency don’t even have any central system tracing the transactions.
The anonymity in Cryptocurrency lead to concern of Consumer Protection as the holder or developer of these currencies are anonymous and can be fake in some cases.
High volatility in price like 5 -10% price fluctuations and price bubbles in currency are harmful for the investors interest as Bitcoin has seen huge downfalls also with the rises over the years. Use latest antivirus, antimalware and firewall software to protect cryptocurrency.

How one can Buy Crypto Currency in India?

In India, Cryptocurrency can be purchased by using the trusted applications of exchanges or mobile wallets. There are generally two platforms through which the bitcoin in India can be bought but the developer can also do the mining of the coins by securing the Blockchain network and processing the Bitcoin transactions. Let’s know about the general methods:

Cryptocurrency Exchange – Like any foreign exchange, here the buying and selling of Crypto Currency takes place. For trading over this exchange, you need to register and open the account with the exchange on which you can purchase, sell or store the Cryptocurrency in exchange of other currencies including Crypto currencies and enjoy trading at some transactional cost of the Exchange.
Peer to Peer Platform – In this application or platform, you directly purchase or sell the property with the other person who holds the cryptocurrency or needs it respectively. This type of platform has no transactional cost as you are not dealing with the exchange however, some platforms can impose some transactional cost for the usage of the platform but it is marginal. So, it is better to check the charges of platform before using it.

To buy Bitcoin in India or other crypto currency, one can use the centralised or decentralised national platforms or international platforms. Before starting trading over the platform, check whether the platform is easy to use, secured, legal, provide maximum and useful pairs of exchange of Crypto currency and national currencies or other crypto currencies and has less transactional cost. Generally, while opening the account on above platforms, one need to go through the KYC verification formality where one need to submit Pan Card, Valid Address Proof, Aadhar, ID card, Bank Account details etc. The need of these documents varies from platform to platform. The verification of KYC can take 1-3 days. The KYC details are asked by bitcoin exchanges whenever you register at the online site for buying a bitcoin in India.

What are the types of Digital Exchanges in India?

There are 4 types of Digital Exchanges in India where one can purchase, store or sell Crypto Currency in India like:

Mobile Wallet Exchange where transactions can be done through androids or apple. For eg. Electrum, Jaxx, Uno coin, Coin base, Trust etc.
Web-based Wallet exchange like Zebpay, Wazir X Multi-Cryptocurrency Wallet.
Desktop Wallet like Guard a Bitcoin Wallet, Wazir X Multi-Cryptocurrency Wallet, Exodus Bitcoin Wallet etc.
Hardware Wallet like Ledger Nano X Bitcoin Wallet, Trez or Model T Bitcoin Wallet, Cool Wallet etc.

Why the RBi is strongly opposing Crypto Currency Trade in India?

Within its circulars and reports, RBI has often cautioned users, holders and traders of virtual currencies including Bitcoins for its concerns regarding consumer protection, market integrity, operations risks, investors interest, data security, influence on effectiveness of monetary policies, money laundering and terrorist financing as this technology allows for anonymous transfer of funds internationally. While the original purchase of the currency may be visible (e.g., through the banking system), all following transfers of the virtual currency are difficult to detect and the trading includes the large level of volatility in its transactions.

In April 2018, the Inter-Ministerial Committee also submitted its initial report, (or a precursor to the report) along with a draft bill known as Crypto Token and Crypto Asset (Banning, Control and Regulation) Bill, 2018 to regulate the transactions of virtual currency in India.

Later, A high-level government panel on virtual cryptocurrencies has even recommended a ban on all virtual cryptocurrencies in India. The committee had submitted its report on 28^th February 2019, along with a proposed draft bill, Banning of Cryptocurrency and Regulation of Official Digital Currency Bill, 2019. It is available on the website of the Department of Economic Affairs.

Along with ban, the committee also proposed a fine of Rs 25 crore and imprisonment up to 10 years for any activity related to virtual currencies, which is carried out by individuals or companies.

Supreme Court View

While hearing the writ petitions regarding crypto currency, The Supreme Court considered three facts as stated in its judgment dated 4^th March, 2020 in the matter of Internet and Mobile Association of India Vs. The Reserve Bank of India:

that RBI has not so far found, in the past 5 years or more, the activities of VC exchanges to have actually impacted adversely, the way the entities regulated by RBI function.
that the consistent stand taken by RBI up to and including in their reply dated 04-09-2019 is that RBI has not prohibited VCs in the country and
that even the Inter-Ministerial Committee constituted on 02-11-2017, which initially recommended a specific legal framework including the introduction of a new law namely, Crypto-token Regulation Bill 2018, was of the opinion that a ban might be an extreme tool and that the same objectives can be achieved through regulatory measures.

Supreme Court tested the power of RBI to take a pre-emptive action like the circular issued by it on the basis of proportionality and stated that for the determination of such actions, RBI needs to show at least some resemblance of any damage suffered by its regulated entities. But there is none. So, it not possible for us to hold that the impugned measure is proportionate and hence the court set aside the circular which indirectly banned Cryptocurrency in India.

So, now a person can freely invest in Crypto Currencies but one should always consider the risk attached with this commodity before purchasing it.

Also Read: How the law protects Consumer Rights in India?

Cryptocurrency and Bitcoin in India