CRYPTOCURRENCY AND IT’S LEGALITY IN THE INDIAN

CONTEXT

EVOLUTION OF THE CURRENCY SYSTEM TO THE INCEPTION OF

CRYTOCUREENCY

The most interesting aspect of homo sapiens has been the evolution that they have gone
through. One can safely assume that no other species has evolved the way mankind has. It is
also needed to be understood that it is not only biological evolution that we have gone through
but it rather is a plethora of subjects in which we have holistically evolved. One such subject
which has witnessed a colossal evolution particularly in the 21 st century is Technology. From
self-driving cars to billionaires flying off to space, we have witnessed a lot till now. One such
form of evolution which will truly define the 21st century is the evolution of the currency
system.

Backs in the 90s when smartphones as an idea had begun to originate, it had become the point
of discussion in every group of Homo Sapiens. Something very similar to that can be seen
today in regards to this term referred to as cryptocurrency. Everybody is discussing it. Either
through friendly discussions or through lectures or is discussing it on various social media
platforms, but the problem is a lot of people do not have clarity regarding the idea of
cryptocurrency. Thus, the question that arises is, what is cryptocurrency?

To answer this question, one needs to first focus on the history of the currency system that has
and is existing pre crypto. Since the evolution of mankind, currency has been an extremely
important aspect of it. The system of currency dates back to the paleolithic era where among
the cave men originated the barter system. The barter system essentially meant exchange of
goods between two individuals, but this system failed as it had some glaring flaws such as its
people’s requirement needs to coincide, no common measure of value, not all goods could be
divided and sub-divided and the goods could not be transported easily unlike the modern
currency which can simply be kept in a wallet or in a bank accessed through a card. Thus, as a
result of the failure of the barter system as a system of currency, from there evolved the idea
of the modern-day currency. Around 110 BC the first official currency was minted and by 1600
AD paper currency had gained widespread popularity which has continued till date. With this
the currency system evolved and emerged credit and debit cards and digital wallets such as
apple pay, amazon pay and various others. It is now a known fact that this entire currency
system is essentially regulated by the governments of the respective countries thus meaning
that the system is completely centralized and any decision regarding the same can only be taken
by the government.

So, the obvious question that is bound to arise is that if there is already such a system of
currency existent in the world why and how did this idea of cryptocurrency incept. To
understand, let’s take the following example. If there is person A and he takes a loans from
person B and says that he will transfer the money to B’s bank account in a day, then it is
absolutely possible that this entire transaction will smoothly occur, but there simultaneously
lies the possibility that because of certain reason such a transaction could not be made possible,
such as there could be a technical issue at the bank or it is also possible that the users account
got hacked (which ones hears about every now and then) or it might also happen that the
transfer limits for the account has exceeded. Thus, these problems can essentially be explained
as central points of failure. It is these reasons which has given rise to the idea of cryptocurrency
and it might not seem so now but there lies a very strong possibility that our future currency
system would be defined by cryptocurrency with this present currency system being replaced
just like it replaced the earlier system of barter. But this is a far-fetched idea and only future
will tell whether this calculated prediction of mine would stand true or not.

Now, coming to the most important aspect of this discussion, i.e., what one essentially means
by the term cryptocurrency? To put it simply, a cryptocurrency is a digital or virtual currency
that is meant to be a medium of exchange. Its usage is very similar to a real-world currency but
the difference being that it does not have a physical embodiment. One of the most unique aspect
of crypto is that it uses cryptography, which essentially is the art of writing codes, to work the
way it does. Through the use of crypto one can easily verify the transfer of funds.
Cryptocurrency uses a hashing algorithm with the help of which a user can very easily
determine whether a transaction is valid or not. The most important aspect of crypto is that it
is decentralized which means that it operates independent of entities such as a bank.
Cryptocurrency is a deep subject to be read about extensively but the above should help
anybody have a basic idea of what a cryptocurrency is.
 WHAT MAKES CRYPTOCURRENCY SPECIAL

The following points shows why cryptocurrency are so special.

1) Little to no transaction cost: today if we use a digital wallet for any transaction then
a particular fee is deducted from our account referred to as transaction cost whereas in
case of crypto there is little or no transaction cost which is a very good thing for
individuals.
2) No limit on purchase or withdrawals: as I had mentioned above, a lot of banks set
certain limits on purchase or withdrawals which can and has been an impediment for
people, but with crypto that problem is sorted as there is no limit on purchase or
withdrawal.
3) Easier to use: in a bank there are too many paper work that an individual has to go
through before he or she could begin any process of transaction which now can be
avoided with the emergence of crypto.
4) International transactions are faster: international transfer even today seems to be a
quite an arduous task where sometimes its take half a day or more to carry out such a
transaction but with crypto this can be done in minutes.
5) Cryptocurrency uses cryptography: this is one of the most important aspect of
cryptocurrency. It uses the process of cryptography which is the process of using
encryption and decryption to secure communication in the presence of third parties with
ill intent.

LEGALITY OF CRYPTOCURRENCY IN INDIA

There lies this common misconception within a lot of people in India that cryptocurrency
is not legal in India and that it is banned by the government of India. This is because people
confuse the unregulated aspect of crypto with it being illegal. Cryptocurrency is not at all
banned in India and it is absolutely legal for an individual to buy one through any of the
crypto platforms available in India. There is no regulatory framework though in India for
cryptocurrencies. In 2017, the government had setup an inter-ministerial committee to
study such forms of virtual currencies and the committee had a positive approach towards
the usage of virtual currency in India mentioning the positive aspect of distributor ledger
technology. The aspect of regulation seems unclear yet as the basic characteristic of
 cryptocurrency is its unregulated nature, thus with time this aspect of regulation can be
understood further.1 But, then again cryptocurrency is starting to get regulated in countries
in the USA and Singapore but regulation will not make crypto loose its set of advantages
and uniqueness.

Cryptocurrency is a very new thing today which is receiving a balanced response of both
positive and negative comments, but one thing is for sure, unlike a lot of other things of the
21st century this is not a fad which will fade away with time. Cryptocurrency is here to stay
and make a holistic impact on mankind and its approach towards currency.

1https://www.businesstoday.in/latest/corporate/story/cryptocurrency-in-india-what-the-govt-stand-legal-
status-its-future-296570-2021-05-20