UNIVERSITY OF MUMBAI

FUNCTIONAL
PROJECT REPORT
ON

A STUDY ON OPPORTUNITIES AND CHALLENGES OF CRYPTOCURRENCYIN INDIA WITH

SPECIAL REFERENCE TO BITCOIN
SUBMITTED BY

Ayusha Thakur
SPECIALIZATIO
N FINANCE
ROLL NO – 201131
IN PARTIAL FULLFILLMENT OF THE REQUIREMENT OF MASTER OF
MANAGEMENT STUDIES
BATCH 2020-22
UNDER THE GUIDANCE OF
Dr. CELINA JOY

MAHATMA EDUCATION SOCIETY’S

PILLAI INSTITUTE OF MANAGEMENT STUDIES AND
RESEARCH NEW PANVEL, NAVI MUMBAI – 410206
 DECLARATION

I hereby declare that the Project Report, prepared by me under the guidance of Dr. CELINA
JOY is a bonafide work undertaken by me and it is not submitted to any other University or
Institution for the award of any degree/diploma/certificate or published any time before.

Name: AYUSHA THAKUR

Roll No: 201131

Signature of the Student

 CERTIFICATE

This is to certify that the Project Report titled “ A STUDY ON OPPORTUNITIES AND
CHALLENGES OF CRYPTOCURRENCYIN INDIA WITH SPECIAL REFERENCE TO BITCOIN” is
successfully completed by Ms. Ayusha Thakur during Semester IV, in partial fulfilment of
the Master’s Degree in Management Studies recognized by the University of Mumbai for the
academic year 2020-22 through Pillai Institute of Management Studies and Research,
New Panvel.
This project work is original and has not been submitted earlier for the award of any
degree/diploma or associate ship of any other University / Institution.

Name: Dr. Celina Joy

Date: 15-03-2022

(Signature of the Guide)

 ACKNOWLEDGEMENTS

First and foremost, I'd like to thank the PILLAI INSTITUTE OF

MANAGEMENT STUDIES AND RESEARCH for including this project as
part of the MBA curriculum.

I am grateful to Dr. Celina Joy for providing me with the chance to discuss at a
deep level in order to obtain this report and for her unwavering cooperation and
patience throughout this project.

I thank my parents for their wonderful cooperation and encouragement in

assisting me in completing this project.

At last but not least gratitude goes to all of my friends who directly or
indirectly helped me to complete this project report.

AYUSHA THAKUR
 EXECUITVE SUMMARY

From a few years onwards cryptocurrencies and Bitcoin grab a hot topic in the financial
industry. Cryptocurrency is a digital or virtual or internet currency that uses cryptography for
security. Cryptocurrency has created unmatched changes in the financial market having both
positive and negative contributions. The concept of cryptocurrency is a little hard to accept,
but it is easy to use. It is considered difficult because it is entirely different from our
conventional currencies that we people are using since ages. Bitcoin was created in the wake
of the 2008 global financial crisis to operate outside of governments, central banks and
financial institutions. Since then, Bitcoin’s framework has challenged many regulators, as
most of them struggled to find ways to bring it under control. This led to some countries
banning it or making it illegal, while some others remained observant and the rest worked out
ways to tax and regulate its operations. This is a conceptual paper tries to study the different
aspects of cryptocurrencies, starting with their history, types, its working, advantages and
disadvantages, challenges and opportunities. The report also attempts to examine Bitcoin's
legal standing in India. It also gives information on the market capitalisation and growth of
Bitcoin over time.
 INDEX
Sr. TABLE OF CONTENTS Pg.
No No.
CHAPTER 1
 Introduction to 1
 Problem Statement 2
 Need of study 2
 Aim 2
 Objectives & Scope of study 2
 Limitations 3
CHAPTER 2
 Introduction to the Cryptocurrency 4
 Introduction to the Blockchain 7
 Types of Cryptocurrencies 8
 Framework Regulation Cryptocurrencies 11
 Legal status of Cryptocurrencies in India 14
 Introduction to the Bitcoin 15
 Bitcoin transaction process 17
 Features of Bitcoin 17
 Opportunities of Bitcoin in India 18
 Challenges of Bitcoin in India 20
 Top Exchanges in India 22
CHAPTER 3
 Literature Review 25
 Research design 26
 Research type 26
 Research method 26
CHAPTER 4
 Data representation of Bitcoin’s Growth 27
 Data analysis on Bitcoin’s Growth 27
 Data representation of Market capitalization of Cryptocurrency market vs Bitcoin market 29
 Data analysis of Market capitalization of Cryptocurrency market vs Bitcoin market 30
CHAPTER 5
 Result of study 31
 Discussion of study 31
CHAPTER 6
 Recommendation 32
 Suggestions 32
CHAPTER 7
 Conclusion 33
 References 33
 CHAPTER 1

 INTRODUCTION TO THE CRYPTOCURRENCY

Since the inception of the fiat money, people have been using it for everyday transaction.
Trading and transaction have been much easier. In the year 2009, after the global crash of
2008, the first form of cryptocurrency has emerged in the form of Bitcoin. It was first
introduced by Nakamoto (2008), an anonymous group or individual that has introduced
Bitcoin as the first digital currency for easier day-to-day transaction from individual to
individual. Bitcoin is operated without the middle man such as banks and monetary
institutions. It is a form of peer- to-peer transaction, without the need to reveal one’s identity
for a transaction to happen. Unlike the current practice, the bank functions as the middleman
or the go-between, knows the identity of buyer and seller, thus engendering the issues of
personal data protection. Bitcoin platform has made the trading and transaction of
cryptocurrency much easier and more independent, without compromising personal
information and details. To some, opting for this method of transaction has entitled them to
transact freely and anonymously. Bitcoin is the first digital coin in the world to have used the
blockchain platform. It is created within a transaction log with computers participated across
a network (Bohme et al., 2015). This blockchain has one of the highest security systems by
not allowing fraudsters to use the currency more than once. The blockchain protocol rely on
proof of work where it ensures miners converge to this structure. The computational
operation is known as hashing where the term hashing power refers to the computational
power of mining the currencies (Kiayias & Panagiotakos, 2015). The system in the
cryptocurrency market is rather complex and quite difficult to understand, even for the
7
players in the industry and researchers doing studies in this field (Fry & Cheach, 2016). There
have been many researchers revealing the benefits of Bitcoin such as security (Bariviera et
al., 2017), low transaction cost (Kim, 2017), high return

Cryptocurrency is a shape of virtual foreign money that has received traction over the past
decade. Like some other foreign money, cryptocurrency is designed to be a medium of
exchange. Since it's far a virtual medium of exchange, you have to think about it as restrained
entries to be had in a database. Now, that’s simply one give up of it. If we're considering
those as restrained entries in a database, then what's that database? The database runs on
Blockchain technology.
Through this various clients or hubs screen and update the passages in the information base.
This forestalls any altering or bogus data. It additionally guarantees fast cycles,
straightforwardness, and simplicity of instalment.
Something else to comprehend about digital forms of money is that they have their own
worth. These qualities are not connected to conventional monetary standards. The worth of
various digital forms of money shift based on request and factors identified with mining and
accessibility.
Many individuals accept that Bitcoin and Crypto are exactly the same thing, however this
isn't correct. Bitcoin is just a kind of cryptographic money. To be reasonable, this digital
money is the most notable one (and right now the best as far as market esteem), which is the
reason such countless individuals wrongly feel that Bitcoin is the main digital money worth
taking a gander at. In any case, the same way that there are a wide range of kinds of
customary monetary standards (like dollars, yen, rupees, and so on), there are various sorts of
digital forms of money, each with changing qualities.
In case you will put resources into digital forms of money (or are simply attempting to
become familiar with this new vehicle of trade) coming up next are a few kinds that you
should know about:
Bitcoin (the very first advanced cash): the market cap for Bitcoin starting at 03 November
2018 is $112,735,453,936, with a solitary coin being valued at $6760.98. Cryptocurrencies is
a digital asset which is a subset of digital currencies and are also known as virtual or
alternative currencies. It uses cryptography to secure transactions and control creation of
additional units of money. Cryptography is the process of transforming plain text into codes
to protect it from malicious third parties. It is a method used to store and protect information,
so that only those for whom the information is intended can read it. From 1998-2009 online
currencies like B-
8
Money and Bit Gold have tried developing online currencies with ledgers secured by
encryption but were unsuccessful at fully establishing it. Bitcoin which is a very popular form
of cryptocurrency was introduced in the year 2009 as the first decentralized cryptocurrency. It
is also known as “altcoins” a blend of bitcoin alternative. Bitcoin originated in the year 2009
when Satoshi Nakamoto published a paper called ‘Bitcoin- A peer to peer electronic cash
system’.
Cryptocurrencies are limited as a result of which their value keeps increasing. There are 5000
different currencies in the world that want to get in on cryptocurrency. $1635 billion is the
estimated market capitalisation of all cryptocurrencies and bitcoin alone is more than Rs.50
lakh crore. 10-12 million people are believed to be active investors and traders in
cryptocurrency in India. The trading hours of cryptocurrency are very flexible as its open
24/7.

How can you use cryptocurrency?

Cryptocurrency does not rely on a third party like financial institutions for exchange for
exchange of currencies. Cryptocurrencies are decentralized and digitally mined. Mining is
used to give value to money. Cryptocurrency is not a form of payment that is accepted quite
yet to make purchases. There are chances of this changing in the near future thus allowing
users to use cryptocurrency as a form of payment. For example, at e-Gifter, users can use
bitcoin to buy gifts cards for Dunkin Donuts, Target, Apple etc. For example, there are also
chances where users might be able to load cryptocurrency to a debit card that can convert
crypto assets into dollars, this is method followed in US. You may also use crypto as an
alternative investment option outside of stocks and bonds.

How can you invest in cryptocurrency?

Cryptocurrencies are unregulated instruments. Therefore, anyone can start a crypto exchange.
Therefore, one should always check the background like its founders, core team etc. and then
start investing. Exchanges frequently have distinctly low fees, however they have a tendency
to have extra complicated interfaces with multiple trade types and advanced performance
charts, all of which can make them intimidating for new crypto investors. Few well known
exchanges are Coinbase, Gemini, BitFlyer, Binance.US etc. These platforms provide user-
friendly easy purchase options for beginners. However, a certain amount of cost is charged to
make use of these options. Incase people find it difficult to trade on their own they can take
help of cryptocurrency brokers. Cryptocurrency brokers are middlemen between the buying
9
party and the cryptocurrency exchange, who charge a certain amount for their services.
Cryptocurrency brokers are pretty convenient however there are certain restrictions on
moving your cryptocurrency holdings off the platform. Few examples of cryptocurrency
brokers are Robinhood, SoFi, Binance India etc. Nonetheless advanced crypto investors hold
their coins in crypto wallets for extra security and few choose hardware crypto wallets which
provide higher security as its not connected to the internet.

 INTRODUCTION TO THE BLOCKCHAIN

A Blockchain is a method of storing data. Data is stored in blocks which are linked to the
previous block. Blockchain is the technology the underpins digital currency (Bitcoin,
Litecoin,
Ethereum, and
the like). The tech
allows digital
information to be
distributed, but not
copied. That means each
individual piece of data
can only have one owner.
The information is
constantly reconciled into
the database, which is
stored in
multiple locations
and updated
instantly. That means the
records are public and
verifiable. Since there’s
no central location, it
harder to hack since the
info exists
simultaneously in

10
 millions of
places. Blockchain
technology was
invented in 2008, but

11
only came into the public conversation when Bitcoin launched. A block is record of a new
transactions. When a block is completed, it’s added to the chain. Bitcoin owners have the
private password (a complex key) to an address on the chain, which is where their ownership
is recorded. Crypto-currency proponents like the distributed storage without a middle man
you don’t need a bank to verify the transfer of money or take a cut of the transaction.

William Mougayar, author of The Business Blockchain, described it this way:

Imagine two entities (e.g. banks) that need to update their own user account balances when
there is a request to transfer money from one customer to another. They need to spend a
tremendous (and costly) amount of time and effort for coordination, synchronization,
messaging and checking to ensure that each transaction happens exactly as it should.
Typically, the money being transferred is held by the originator until it can be confirmed that it
was received by the recipient. With the blockchain, a single ledger of transaction entries that
both parties have access to can simplify the coordination and validation efforts because there
is always a single version of records, not two disparate databases.
Blockchain is going to be used for more than just currency and transactions. To give you an
idea of how seriously it’s been studied and adopted, IBM has 1,000 employees working on
blockchain-powered projects. They’ve also set aside $200 million for development. Financial
and tech firms invested an estimate $1.4 billion dollars in blockchain in 2016 with an increase
to $2.1 billion dollars in 2018.

 TYPES OF
CRYPTOCURRENCIES

Cryptocurrency is designed to work as a

medium of exchange. Over the internet is over
1600 and growing. A new cryptocurrency can
be created at any time. By market
capitalisation, Bitcoin is currently the largest
blockchain network, folloby Ripple, Ethereum
and Litecoin

12
1. Bitcoin (BTC)
One of the most commonly known currencies, Bitcoin is considered an original
cryptocurrency. It was the number of cryptocurrencies available created in 2009 as an open-
source software. Using blockchain technology, Bitcoin allows users to make transparent peer-
to-peer transactions. All users can view these transactions; however, they are secured through
the algorithm within the blockchain. While everyone can see the transaction, only the owner
of that Bitcoin can decrypt it with a “private key” that is given to each owner. Unlike a bank,
there is no central authority figure in the Bitcoin. Bitcoin users control the sending and
receiving of money, which allows for anonymous transactions to take place throughout the
world.

2. Litecoin (LTC)
Litecoin was launched in October 2011 as an alternative to Bitcoin. Like other
cryptocurrencies, Litecoin is a peer-to-peer cryptocurrency and open source-source software
project released under the MIT/X11 license. Its creation and transfer is based on an open
source cryptographic protocol and it is completely decentralised. Litecoin is different in some
ways from Bitcoin. A few differences between these digital currencies are:
The Litecoin network aims to process a block every 2.5 minutes but Bitcoin takes 10 minutes.
This allows Litecoin to have faster transaction confirmation. The coin limit for Bitcoin is 21
million and Litecoin is 84 million. Experts says that Litecoin are more complicated to create
and more expensive to produce because it uses different algorithm called scrypt and FPGA
(Field Programable Gate Array) and ASIC (Application Specific Integrated Circuit) devices
made for mining.

3. Ethereum (ETH)
Ethereum is a type of cryptocurrency which was proposed in late 2013 by Vitalik Buterin, a
crypto currency researcher and programmer. It was initially released on July 2015. It is an
open source platform based on blockchain technology. While tracking ownership of digital
currency transactions, Ethereum blockchain also focuses on running the programming code
of any decentralised application, allowing it to be used by application developers to pay for
transaction fees and services on the Ethereum network.

13
4. Ripple (XRP)
Ripple is a real-time gross settlement system, currency exchange and remittance network
created by Ripple Labs Incorporation, a US based company. Ripple was released in 2012 that
acts as both a cryptocurrency and a digital payment network for financial transactions. It’s a
global settlement network that is designed to create a fast, secure and low-cost method of
transferring money. Ripple allows for any type of currency to be exchanged, from USD and
Bitcoin to gold and EUR and connects to banks, unlike other currencies. Ripple also differs
from other types of digital currencies because its primary focus is not for person-to-person
transactions, rather for moving sums of money on a larger scale.

5. Bitcoin Cash
Bitcoin Cash is a type of digital currency that was created to improve certain features of
Bitcoin. Bitcoin Cash increased the size of blocks, allowing more transactions to be
processed faster.

6. Ethereum Classic
Ethereum Classic is a version of the Ethereumn blockchain. It runs smart contracts on a
similar decentralised platform. Smart contracts are applications that run exactly as
programmed without any possibility of downtime, censorship, fraud or third-party interface.
Like Ethereum, it provides a value token called “classic ether,” which is used to pay users for
products or services

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  FRAMEWORK REGULATION OF CRYPTOCURRENCIES
(AROUND THE WORLD)
As cryptocurrency’s transformation from speculative investment to a balanced portfolio
stablemate continues to gather pace, governments around the world remain divided on how to
regulate the emerging asset class. Below, we break down the current digital currency
regulatory landscape by country.

 United States

Despite a large number of cryptocurrency investors and blockchain firms in the United States,
the country hasn’t yet developed a clear regulatory framework for the asset class. The
Securities and Exchange Commission (SEC) typically views cryptocurrency as a security,
while the Commodity Futures Trading Commission (CFTC) calls Bitcoin (BTCUSD) a
commodity, and the Treasury calls it a currency. Crypto exchanges in the United States fall
under the regulatory scope of the Bank Secrecy Act (BSA) and must register with the
Financial Crimes Enforcement Network (FinCEN). They are also required to comply with
anti-money laundering (AML) and combating the financing of terrorism (CFT) obligations.
Meanwhile, the Internal Revenue Service (IRS) classifies cryptocurrencies as property for
federal income tax purposes. Crypto investors should closely monitor a high-profile court
case between Ripple Labs Inc. and the SEC, as well as threats by the agency to sue leading
digital currency exchange Coinbase Global Inc. (COIN), for further regulatory clarity.

 Canada

Regulators have generally taken a proactive stance toward crypto in Canada. It became the
first country to approve a Bitcoin exchange-traded fund (ETF) in February 2021.
Additionally, the Canadian Securities Administrators (CSA) and the Investment Industry
Regulatory Organization of Canada (IIROC) have clarified that crypto trading platforms and
dealers in the country must register with provincial regulators. Furthermore, Canada classifies
crypto investment firms as money service businesses (MSBs) and requires that they register
with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). From a
taxation standpoint, Canada treats cryptocurrency similar to other commodities.

15
 United Kingdom

The United Kingdom considers cryptocurrency as property but not legal tender. Additionally,
cryptocurrency exchanges must register with the U.K. Financial Conduct Authority (FCA)
and are banned from offering crypto derivatives trading. Moreover, the regulatory body has
introduced cryptocurrency-specific requirements relating to know your customer (KYC), as
well as to the above-mentioned AML and CFT. Although investors still pay capital gains tax
on crypto trading profits, more broadly, taxability depends on the crypto activities undertaken
and who engages in the transaction.

 Japan

The land of the rising sun takes a progressive approach to crypto regulations, recognizing
cryptocurrencies as legal property under the Payment Services Act (PSA). Meanwhile, crypto
exchanges in the country must register with the Financial Services Agency (FSA) and comply
with AML/CFT obligations. Japan treats trading gains generated from cryptocurrency as
“miscellaneous income” and taxes investors accordingly.

 Australia

The land down under takes a relatively proactive stance toward crypto regulation. Australia
classifies cryptocurrencies as legal property, which subsequently makes them subject to
capital gains tax. Exchanges are free to operate in the country, provided that they register
with the Australian Transaction Reports and Analysis Centre (AUSTRAC) and meet specific
AML/CTF obligations. In 2019, the Australian Securities and Investments Commission
(ASIC) introduced regulatory requirements for initial coin offerings (ICOs) and banned
exchanges offering privacy coins.

 Singapore

Similarly to the United Kingdom, the island state classifies cryptocurrency as property but
not legal tender. The country’s Monetary Authority of Singapore (MAS) licenses and
regulates exchanges as outlined in the Payment Services Act (PSA). Singapore, in part, gets
its reputation as a cryptocurrency safe haven because long-term capital gains are not taxed.
However, the country taxes companies that regularly transact in cryptocurrency, treating
gains as income.

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 South Korea

The country doesn’t consider cryptocurrencies as legal tender or financial assets. As such,
digital currency transactions avoid capital gains tax. The South Korean Financial Supervisory
Service (FSS) oversees crypto exchange regulation, with operators subject to strict AML/CFT
obligations. As of September 2021, cryptocurrency exchanges and other virtual asset service
providers must register with the Korea Financial Intelligence Unit (KFIU), a division of the
Financial Services Commission (FSC).

 China

The emerging global power doesn’t class cryptocurrencies as legal tender; however, it does
classify them as property for the purposes of determining inheritances. The People’s Bank of
China (PBOC) bans crypto exchanges from operating in the country, stating that they
facilitate public financing without approval. The world’s largest crypto exchange, Binance,
initially launched in China but relocated its headquarters to the Cayman Islands in 2017
following the country’s crackdown on crypto regulation. Furthermore, China placed a ban on
bitcoin mining in May 2021, forcing many engaging in the activity to close operations
entirely or relocate to jurisdictions with a more favourable regulatory environment.

 India

Like most countries, the subcontinent outlines that cryptocurrencies are not legal tender.
Despite this, the country’s Central Board of Direct Taxation specifies that investors must pay
taxes on crypto trading profits. In 2018, the Reserve Bank of India (RBI) banned financial
institutions from transacting in virtual currencies; however, the Supreme Court reversed this
decision in March 2020. Still, regulations remain uncertain in the country. For instance, India
proposed a law in early 2021 that would make it illegal to issue, hold, mine, and trade
cryptocurrencies other than state-backed digital assets.

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 European Union

Cryptocurrency is legal throughout most of the European Union (EU), although exchange
governance depends on individual member states. Meanwhile, taxation also varies by country
within the EU, ranging from 0% to 50%. In recent years, the EU’s Fifth and Sixth Anti-
Money Laundering Directives (5AMLD and 6AMLD) have come into effect, which tighten
KYC/CFT obligations and standard reporting requirements. In September 2020, the European
Commission proposed the Markets in Crypto-Assets Regulation (MiCA)—a framework that
increases consumer protections, establishes clear crypto industry conduct, and introduces new
licensing requirements.

 LEGAL STATUS OF CRYPTOCURRENCIES IN INDIA

India’s general attitude towards cryptocurrency has been negative. In 2017, the central
Reserve Bank of India (RBI) considered a now-defunct proposal to introduce its own crypto
currency, Lakshmi. It has also been looking into encouraging blockchain technology in
financial and payment institutions. But the government has shunned cryptocurrency with
policymakers opting to outlaw cryptocurrency with incarceration and legal petitions.
Bitcoin is not recognized as legal tender and, as of 23 July 2019, the Banning of
Cryptocurrency and Regulation of Official Digital Currency Bill has been proposed.
Unocoin, an India-based exchange, allowed individuals to trade Bitcoins but is now disabled.
However, Bitcoin is still traded in India through digital currency exchanges like Zeb Pay,
Coin Delta and Coin Secure. Many Bitcoin traders usually buy through diaspora networks in
countries where it is legal tender.

Is It Legal in India?
Finance minister Arun Jaitley, in his budget speech on 1 February 2018, stated that the
government will do everything to discontinue the use of bitcoin and other virtual currencies
in India for criminal uses. He reiterated that India does not recognise them as legal tender
and will instead encourage blockchain technology in payment systems.

18
"The government does not recognize cryptocurrency as legal tender or coin and will take all
measures to eliminate the use of these crypto assets in financing illegitimate activities or as
part of the payments system," Jaitley said.
In early 2018 India's central bank, the Reserve Bank of India (RBI) announced a ban on the
sale or purchase of cryptocurrency for entities regulated by RBI. Banning of
Cryptocurrency and Regulation of Official Digital Currency Bill 2019 draft has proposed a
10-year prison sentence for anyone who mines, generates, holds, sells, transfers, disposes,
issues or deals in crypto currencies.

In 2019, a petition has been filed by Internet and Mobile Association of India with the
Supreme Court of India challenging the legality of crypto currencies and seeking a
direction or order restraining their transaction. In March 2020, the Supreme Court of
India passed the verdict, revoking the RBI ban on cryptocurrency trade.

In 2021, the government is exploring the creation of a state-backed digital currency issued by
the Reserve Bank of India, while banning private ones like Bitcoin.

In 2022 Budget, Finance Minister Nirmala Sitharaman said Cryptocurrency transactions will
be taxes at 30 percent. The Budget proposed that no deduction will be allowed except cost of
acquisition and losses can’t be set off against the other income.
Therefore currently the Legal status for Cryptocurrencies or Bitcoin is in the Grey zone as
there is no legal backing or ban, however existing laws like anti-money laundering , cheating
are applicable.(as per the article of TOI)

 INTRODUCTION TO THE BITCOIN

One of the most popular cryptocurrency wallet using is Bitcoin which was invented by an
unknown person or group of people using the name Satoshi Nakamoto in 2008.Bitcoin is a
cryptocurrency, a form of electronic cash.It is a decentralised digital currency that can be sent
from user to user on the peer-to-peer Bitcoin network without the need for intermediaries,
where transactions happen through a public ledger called blockchain, handling users’ data

19
anonymously. Ten years since its introduction, Bitcoin is today the most widely used and
accepted digital currency.
Although Bitcoin is commonly referred to as a cryptocurrency, Nakatamo himself referred to
it as “a system for electronic transactions without relying on trust”. Other electronic payments
require a trusted intermediary, such as bank or electronic unit, in order to verify a transaction.
Instead of relying on a single trusted intermediary, like a bank or a credit card network to
transmit and verify transaction, the Bitcoin system relies upon a large number of competing
“miners” to verify transactions. Bitcoin regulate and generate units of currency using the
rules of cryptography. The transaction fees of traditional online payment mechanisms are
more than the transaction fees of Bitcoin transaction. Bitcoins are completely virtual coins
designed to be self-contained for their value. There is no need for bank to move and store
money. Bitcoins are not physically present, so that only balances are kept on a public wallet
in the cloud. All Bitcoin transaction is verified by a massive amount of computing power. A
personal database that you can store on your computer drive, on your smart phone, on your
tablet or somewhere in the cloud is called wallet. Bitcoins are transferred from one personal
wallet to another

Bitcoin and other prominent cryptocurrencies have gained much attention since the last
several years. Globally known as digital coin and virtual currency, this cryptocurrency is
gained and traded within the blockchain system. The blockchain technology adopted in using
the cryptocurrency has raised the eyebrows within the banking sector, government,
stakeholders and individual investors. The rise of the cryptocurrency within this decade since
the inception of Bitcoin in 2009 has taken the market by storm. Cryptocurrency is anticipated
as the future currency that might replace the current paper currency worldwide. Even though
the interest has caught the attention of users, many are not aware of its opportunities,
drawbacks and challenges for the future. Researches on cryptocurrencies are still lacking and
still at its infancy stage. In providing substantial guide and view to the academic field and
users, this paper will discuss the opportunities in the cryptocurrency such as the security of its
technology, low transaction cost and high investment return. The originality of this paper is
on the discussion within law and regulation, high energy consumption, possibility of crash
and bubble, and attacks on network. The future undertakings of cryptocurrency and its
application will be systematically reviewed in this paper.

20
  BITCOIN TRANSACTION PROCESS

Individuals can use Bitcoins to make payments to other individuals or merchants without
involving a third- party, like a bank or financial institution, for the purpose of validation.
Instead, transactions are cleared and validated within the system through the blockchain.
Most cryptocurrencies are based on blockchain technology. In simple terms, it is a system to
transfer and store data or information that is generated while transacting in a cryptocurrency.
The blockchain is a public ledger that records and publicly displays all Bitcoin transactions
that have been executed within the Bitcoin system. A block is a permanent record of recent
transactions. The blocks of recorded data build upon each other to form the blockchain which
dates all the way back to the first Bitcoin transaction. The transparency established by the
blockchain is essential in securing the validation process as it allows the community to
monitor and self-police transaction activity. It also allows for verification of both the spender
and the recipient and ensures that double-spending a Bitcoin is impossible.

 FEATURES OF BITCOIN

The Bitcoin protocol is not just about sending money from one person to another. It has many
features that distinguish it from other cryptocurrencies.

• Control against fraud: It provides users with top level of protection against most common
frauds like charge backs or unwanted charges. Because of the Security Users can encrypt
their wallet and have complete control over their money. So there is no chance of any type of
Fraud.
• Globally accessible: Bitcoin allows any bank, business or individual to securely send and
receive payments anywhere at any time in few minutes. All types of Payments in the world
are acceptable.
• Cost efficient: With Bitcoin transactions can be possible directly without any mid person.
The transaction time and cost is much less as compare to other payment system.
• Transparency: All Bitcoin transactions are public and transparent to all users. The Block
chain stores all transaction details. Where user can any time verify.

21
  OPPORTUNITIES OF BITCOIN IN INDIA

Ivaschenko (2016), provides the advantages and disadvantages of Bitcoin as stated below.

• Anonymity. -With a bank, the people must give their ID when applying for an account. With
Bitcoin, anyone anywhere in the world can send money to each other. There is no KYC
(Know- Your-Customer) process to open a Bitcoin wallet. It is completely anonymous and at
the same time fully transparent. Any company can create an infinite number of Bitcoin
addresses without reference to name, address or any other information.

• Peer-to-peer cryptocurrency network -in such networks there is no master server, which is
responsible for all operations. Exchange of information (in this case money) is between 2-3 or
more software clients. All installed by users’ program-wallets are part of a Bitcoin network.
Each client stores a record of all committed transactions and the number of Bitcoins in each
wallet. Transactions are made by hundreds of distributed servers. Neither banks or taxes, nor
governments can control the exchange of money between.

• No inflation – the maximum number of coins is strictly limited by 21 million Bitcoins. As

there are neither political forces nor corporations able to change this order, there is no
possibility for development of inflation in the system.

• Open code for mining crypto currency – BTC applies the same algorithms that are used in
online banking. The only difference of Internet banking is the disclosure of information about
the users. All information about the transaction in the BTC network is shared (how, when),
but there is no data about the recipient or the sender of the coins (there is no access to the
personal information of the owner’s wallet).

• Unlimited possibilities of transaction – each of the wallet holders can pay to anyone,
anywhere and any amount. The transaction cannot be controlled or prevented, so you can
make transfers anywhere in the world wherever another user with a Bitcoin wallet is located.

22
• No boundaries- Payments made in this system are impossible to cancel. The coins cannot be
faked, copied or spent twice. These capabilities guarantee the integrity of the entire system.
Every month the number of online shops, resources, and companies to accept BTC is
expanding.

• Low BTC operation cost-The BTC cryptocurrency works as physical cash, combining the
functions of e-commerce. No need to pay commission and fees to banks and other
organisations. The main part of such process is mathematics, which does not need money.
The commission fee in this system is lower than in any other. It amounts to 0.1% of the
transaction amount. The operation interest charges go to BTC miner’s wallets.

• Decentralisation- There is no central control authority in the network, the network is

distributed to all participants, each computer mining Bitcoins is a member of this system.
This means that the central authority has no power to dictate rules for owners of Bitcoins.
And even if some part of the network goes offline, the payment system will continue to
operate stable.

• Easy to use Taken into account that the procedure of opening an account for the company in
Ukrainian banks is overcomplicated and can be refused without explanation, using BTC is
convenient for companies. The company needs approximately 5 minutes to create a BTC
wallet and immediately starts to use it without any questions and commissions.

• Transparency-The BTC stores the history of transactions that have ever taken place. It is
called a sequential chain of blocks or blockchain. The block chain keeps information about
everything. So, if the company has publicly used the BTC address, then anyone can see how
much BTC is owned. If the company address is not publicly confirmed, then no one will ever
know that it belongs to this company. For complete anonymity companies usually use the
unique BTC address for every single transaction.

• Speed of transaction- The ability to send money anywhere and to anyone in a matter of
minutes after the BTC network will process the payment.

23
  CHALLENGES OF BITCOIN IN INDIA

• Government Regulation: Indian government stand towards Bitcoin is the prime challenge
for its growth. The future of cryptocurrency is doubtful in India for now. Currently in 2019
RBI announced that cryptocurrency will not be considered as a legal tender. Because it is
completely decentralised days that the banks take. If we want to send an international
payment, it will normally take 3+ days with our bank. If we send it using Bitcoin, it will only
take around 10 minutes. Sometimes it takes longer (up to an hour or more), but it is still much
quicker than the 3+days

• Bitcoin is not very easy to use: Private keys, public keys, opening and using a wallet etc. are
not very easy for people who aren’t confident using computers. When we want to send a
payment to someone, we have to type a long set of numbers and letters (their public key) into
the computer. Bitcoin needs to become easy to use so that everyone in the world can use it,
just like browsing the internet is. Entrepreneurs within the country are seeing this as a natural
opportunity for the proliferation of Bitcoin and other cryptocurrencies within the country. It’s
reported that India currently has around 30,000 Bitcoin owners in the country, and that
number is expected to grow.

• Security Threat: Hackers and malicious users can create as much as they want from virtual
currency if they break the system and know the method of virtual currency creations. This
will lead to the ability to create fake virtual currency or steal virtual currency by just changing
the accounts balances. Negative impact on Indian monetary system: Cryptocurrency like
Bitcoin help users to purchase virtual and real goods and services with virtual currency in
some platforms may reduce the demands on real money. Users will no longer depend on real
money to buy what they want and they will use virtual money instead. On the other hand,
some platforms enable users to exchange their virtual currency with real currency and this
will increase the demands on real world currency. This demand-supply fluctuation will
negatively affect the real monetary systems.

• Using for Alleged activities: Several incidences have occurred stating that Bitcoins have
been used for illicit and illegal activities around the globe like money laundering, black
marketing, tax evasion etc.

24
• No Ombudsman: There is no forum, where a user can possibly reach out for any help or
grievance, as a result of which Indian consumers are being exposed to transactional and
informative risks. Upcoming entry of India’s own Cryptocurrency. As per business standard
report the Indian government is going to introduce its own Cryptocurrency similar to Bitcoin
called “Lakshmi”. Its discussion is going on.

• Deep embedment on local currency: EY’s Global Innovation Leader Paul Brody has
indicated that Bitcoin and other cryptocurrency lack any concrete practical use in the country,
given that local currency is deeply embedded in the economy.

• Human mismanagement in online exchanges: The people running unregulated online

exchanges that trade cash for Bitcoins can be dishonest or incompetent. The only difference is
that conventional banking losses are partially insured for the bank users, while Bitcoin
exchanges have no insurance coverage for users.

• Bitcoin transactions are irreversible- Conventional payment methods such as a credit card
charge, bank draft, personal check, or wire transfer all benefit from being insured and
reversible by the banks involved. In the case of Bitcoins, every time Bitcoins change hands
and change wallets, the result is final. Simultaneously, there is no insurance protection for
your Bitcoin wallet. If you lose your wallet's hard drive data or even your wallet password,
your wallet's contents are gone forever.

• Cannot be Frozen or Audited- Bitcoin wallets cannot be seized or frozen or audited by

banks and law enforcement. Bitcoin wallets cannot have spending and withdrawal limits
imposed on them. Nobody but the owner of the Bitcoin wallet decides how the wealth is
managed.

• Technical weakness - time delay in confirmation: Bitcoins can be double-spent in some rare
instances during the confirmation interval. Because Bitcoins travel peer-to-peer, it takes
several seconds for a transaction to be confirmed across the P2P swarm of computers. During
these few seconds, a dishonest person who employs fast clicking can submit a second
payment of the same Bitcoins to a different recipient. While the system eventually catches the
double- spending and negates the dishonest second transaction, if the second recipient
transfers goods
25
 to the dishonest buyer before receiving confirmation of the dishonest transaction, then that
second recipient loses both the payment and the goods.

 TOP BITCOIN EXCHANGES IN INDIA

The followings are some of the top exchanges are still currently used in India:

 Unocoin

Unocoin is one of the oldest cryptocurrency exchanges in India, having been established in 2013,
well before cryptocurrencies were big in India. It is backed by investment from the USA and is
a regulated company offering low 1% fees which fall to 0.7% with increased trading volumes. It
is a relatively easy exchange platform, allowing users to buy crypto currency with any Indian
bank account. However, with the banning proposal at hand, things might get challenging for
Unocoin. The platform at the moment boasts about 1.5 million (15 lakh) registered investors. An
interesting feature of the app is that it allows users to schedule sales, which allows users to
automatically sell a certain amount of their cryptocurrencies on a certain date and time.

 Zebpay

Zebpay has also emerged as a popular cryptocurrency exchange, mostly because users say it has a
clean, light and simple user interface. Further, it offers users particular security feature where
users

26
 can disable all outgoing transactions with the click of a button. The exchange, however, has a
more limited variety of cryptocurrencies on offer.

 CoinDCX

Launched in 2018, this Mumbai-based start-up has emerged as one of the most
popular cryptocurrency exchanges in India, with more than 3.5 million (35 lakh) investors. Some
of the major attractions of the exchange are that the trading fee is minimal, the deposits and
withdrawals are free, an especially useful feature for those who want to trade directly between
the Indian rupee and a particular cryptocurrency. The exchange gives investors access to more
than 200 cryptocurrencies.

 WazirX

One of India’s most trusted exchange platforms, WazirX was founded in 2018. It focuses
on exchange-escrowed P2P services to enable customers to continue to withdraw INR. WazirX
follows the KYC norms, has a mobile application for both Android and iOS users and also claims
to provide multiple hundred transactions per second. This exchange has been making quite a buzz
on social media. It allows users to invest in INR, USD, Bitcoin, and even make peer-to-peer
transactions. The exchange also features its own cryptocurrency WRX, which can be bought
using INR, and then exchanged for other cryptocurrencies. A popular feature of the app is that
users can earn tokens through various contests featured on the app.

 CoinSwitch Kuber

This exchange received a lot of attention due to its marketing efforts during the Indian Premier
League. Launched in 2017, it has now risen to become one of the top-5 exchanges in India. One
of its most attractive features is that it allows users to trade with as small a sum as ₹100. This
appeals to a lot of new users looking to understand how the crypto market works without having
to sink larger sums into it in the beginning.

27
 Other methods

Outside of exchanges, P2P trading platforms enable Bitcoin purchases in India, in spite of the
bank bans.
Two important P2P marketplaces in India are:

 Paxful is a peer to peer marketplace founded in 2015 that allows buyers and sellers to meet
online and trade directly Bitcoin with each other. Sellers on Paxful accept over 300 payment
methods, including the major Indian payment methods like PayTM, Bheem, Phonepe. As a
result, many Indians use Paxful due to ease of access and payment.

 Local Bitcoins supports the most popular payment methods and allows individuals from
different countries to purchase Bitcoin for their local currency. Local Bitcoins currently
operates in several major Indian cities like Mumbai, Hyderabad, Kolkata, Delhi, Ahmedabad,
Chandigarh, Pune, Guwahati and many more. Again, due to the 2019 Supreme Court
Proposal, many exchanges and marketplaces are wary of the Indian government’s attitude
towards cryptocurrency in general. As of September 2019, there are no Bitcoin ATMs in
India.

28
 CHAPTER 2

LITERATURE REVIEW

Kurihara & Fukushima, 2017 explained, it is not digital cash, which has prevailed all over the
world. Unlike central bank- and government-issued currency, Bitcoin can be inflated at will,
the supply of Bitcoin is limited to a certain volume, which cannot be changed.

Wonglimpiyarat, 2016 highlights that there are obstacles of lawless tender where Bitcoin wants
the government’s legislation to boost the permissibility of this new currency. Bitcoin
currency may transform the future of banking in developing countries but it is hard to
substitute a cash- based society.

Dr. Anil Kumar V.V & Swathy. P, 2019 is a conceptual paper tries to study the different aspects
of cryptocurrencies, starting with their history, types, its working, advantages and
disadvantages, challenges and opportunities. The study also tries to analyse the legal status of
Bitcoin in India.

Dr Mubarak, Hosmani Manjunath,2021, his paper investigates about cryptocurrency present

legality as well as future government moves impact on these currencies. The paper also
analyses investment risks in both Bitcoin and Gold countries have responded in terms of
regulations & legislations towards crypto currencies to develop a clear picture of its impact
on various laws in India in order to regulate it

Prof. Blesson James & Prof. Manjari Parashar, 2018, This study focuses on understanding what
cryptocurrency is all about and its impact on the Indian economy. The study also focuses on
the present situation and future prospects of cryptocurrencies in India.

29
 RESEARCH DESIGN

 Learnt about cryptocurrency from various platforms of websites, YouTube, podcasts.

 Google search -the Research papers, relevant articles, and statistics
 Analyses of growth through technical charts

 RESEARCH TYPE

o Secondary Data
The secondary data necessary for completing the investigation will be collecting from the published
sources in the academic libraries, web sites, books, journals, magazines, etc.

o Quantitative approach
 Market analysis on the Cryptocurrency Vs Bitcoin market capitalisation
 Market analysis on the Bitcoin and Cryptocurrency’s growth over a period of time

 RESEARCH METHOD

Researcher have been selected analytical research methodology for the this study. To satisfy
the objectives of the research, researcher used secondary data from various publications by
financial websites, government of India, journals, newspapers, books and magazines etc…
In addition, a market analysis of bitcoin and cryptocurrency in terms of market capitalization
and growth has been conduct

30
 CHAPTER 3
PROFILE OF THE STUDY

BENIFITS OF CRYPTOCURRENCY

Benefits of cryptocurrency
Job opportunities – With many startups re-entering the market, competition for top talent in the area
of blockchain technology and cryptocurrencies may increase. From blockchain developers to
programmers, production engineers and project managers, there will be many suitors for top talent in the
field of blockchain. Industry consultants, advertisers, content developers and group administrators among
others will now have a major role to play in the national embrace of cryptocurrencies that will now be
sought by many startups. The RBI will now be encouraged to help control the world of opportunities that
cryptocurrencies generate. The stance made clear by the Supreme Court should that the RBI rethink its
restrictive approach to cryptography and then come up with more balanced and well-thought-out rules to
protect the public interest and that of other ecosystem stakeholders. The RBI can take a leaf out of its
global peers, as many central banks have launched their cryptocurrencies in other countries. Nonetheless,
the expectation here is that the latest measures will press for more acceptance and tighter enforcement.

Immunity from theft – At present, the financial system, and the resultant economy, is not immune to
robberies or fraud. As we know the planet is becoming more vulnerable to complex leaks and hacks. With
several ransomware attacks, data leaks from top-notch banks and credit card companies, news headlines
have been abuzz in the last few years. India was going digital at the time, the base of which was built on
Aadhaar authentication, Jan Dhan accounts etc. However, the same does give rise to flaws in technology,
with criminals planning to break the authentication mechanism of Aadhaar or Jan-Dhan accounts. In
making cryptocurrencies all verified transactions must be deposited in a public ledger. To ensure the
legitimacy of record keeping, all identities of the coin owners are encrypted. You own it because the
currency is decentralized. It has no power over either the government or bank.

Accessibility – Blockchain is the reason why crypto-currency is worth something. Ease of use is the
reason why there is a high demand for crypto-currency. All you need is a mobile screen, an internet
connection, and you easily make payments and money transfers to your accounts. There are more than
two billion people with access to the Internet who cannot use conventional forms of trade. These people
are clued-in to the crypto-currency market.

Global economies – Crypto-currency presents Indians with a golden opportunity to be on par with the
global economy, particularly the present burgeoning millennial generation. A cryptocurrencies-led
economy is a decentralised economy. There is plenty of time and money to secure third-party approvals,
and all the time and energy spent in negotiations will no longer be needed when buying, for example, a
house etc. Considering some of the trailblazing and epoch-making trends of the past, including the
emergence of the internet, the technological economy, the creation of Silicon Valley etc., India has just
sought to balance the pace of global innovations.

31
 CRITICISM OF CRYPTOCURRENCY

Criticism of cryptocurrency
The semi-anonymous aspect of cryptocurrency transfers makes them ideal for a variety of illegal
practices, such as money laundering and tax evasion. Crypto-currency supporters, though, also strongly
respect their anonymity, citing privacy advantages such as protection for whistleblowers or dissidents
living under oppressive regimes. Some cryptocurrencies are more intimate.

The cryptocurrency form is not exempt from any financial and security issues. I reviewed many studies and
cryptocurrency networks and even explored several markets for selling cryptocurrency to investigate the
difficulties and problems that occur in this interactive phenomena.

Money laundering – Money laundering is one danger that is highly likely to increase with the usage
of VC especially with platforms that allow users to exchange virtual currency with real money. In realistic
situations, the police detained a group of 14 people in Korea in 2008 for stealing $38 million from virtual
currency transactions. The group translated the $38 million that gold farming produces from Korea into a
paper firm in China as purchasing payments.

Black market – Perhaps one of the biggest drawbacks and security issues affecting blockchain is its
potential to promote criminal activity. There are several anonymous trades on the grey and black markets
denominated in Bitcoin and other cryptocurrencies. For example, Bitcoin was used by the notorious “dark
web” platform Silk Road, promoting illegal drug sales and other criminal acts before being shut down in
2014. Cryptocurrencies are now highly common money-laundering devices. They unlawfully acquired
money by funnelling through a “safe” conduit that conceals the origins. For examples, when a gamer
wants to leave a game, he/she may want to sell the virtual currency that he/she owns by selling it in the
game forums. The way payments are collected is dangerous because many fraudulent users can not
complete the payment, or challenge after payment. They will then get their money back plus the virtual
currency.

Tax evasion – Since national governments do not oversee cryptocurrencies, cryptocurrencies typically
remain outside of their direct jurisdiction, attracting tax evaders naturally. In Bitcoin and other coins,
several small companies pay workers. They do so to reduce payroll tax responsibility and to help avoid
income tax obligation for their workers. Even they embrace tokens from online traders to attempt to
escape selling and income tax responsibility.

No refunds – The notion of such an arbitrator violates the decentralizing spirit at the heart of the new
theory of cryptocurrencies. What this means is that if you’re robbed in a crypto-currency deal you don’t
have someone to turn to. Although cryptocurrency miners play a role in cryptocurrency transactions as
quasi-intermediaries, they are not responsible for arbitrating conflicts between the transacting parties. An
example is to pay upfront for an item that you never get. Large payment providers such as MasterCard,
Visa and PayPal also move in to help solve conflicts between buyers and sellers. Their method of paying
for, or refunding, is intended to avoid vendor fraud. Although some newer cryptocurrencies seek to
resolve the surrounding chargebacks or refunds problem, the solutions remain incomplete and still
unproven.

Data loss – Considering a virtually uncrackable source code, impenetrable authentication protocols (keys)
and sufficient security protections (which Mt. Gox lacked), keeping money in the cloud or a physical data
storage unit is better than in a backpack or back pocket. Also, those who store their data in a single cloud
definitive step away from traditional cash, which the3y1find to be unreliable and potentially dangerous.
All
provider will risk failure if the server is physically compromised or removed from the internet. The early
advocates of crypto-currency believed that, if properly protected, digital alternate currencies agreed to helpa

definitive step away from traditional cash, which the3y1find to be unreliable and potentially dangerous.
All
this means cryptocurrency consumers are taking reasonable and appropriate measures to avoid data loss.
For example, if their computer is lost or robbed, the consumers who store their private keys on single
physical storage devices will incur a permanent financial loss.

High price and not exchangeable – The most popular cryptocurrencies, those with the highest
dollar market capitalisation, have dedicated online exchanges allowing direct exchange for fiat currency.
The remaining cryptocurrencies have no dedicated online exchanges. Many cryptocurrencies have few
extraordinary units and are concentrated in the hands of a handful of individuals (often currency
developers and close associates). For fiat currencies, they are therefore not explicitly exchangeable.
Instead, before the fiat currency conversion, consumers could turn them into more widely used
cryptocurrencies, including Bitcoin. These holders manage currency stocks efficiently, making them
vulnerable to fluctuations in wild valuation and simple manipulation. This suppresses competition for
some less-used cryptocurrencies, and thus the valuation of others.

32
CRYPTOCURRENCY IN INDIA

33
INTRODUCTION

Crypto currencies could provide a significant benefit by overcoming the lack of social trust and by
increasing the access to financial services (Nakamoto, 2008) as they can be considered as a medium to
support the growth process in developing countries by increasing financial inclusion, providing a better
traceability of funds and to help people to escape poverty (Ammous, 2015).
To provide a comprehensive overview of the opportunities of crypto currencies in developing countries, it
is necessary to understand the general advantages and disadvantages crypto currencies provide for users
compared to central bank-issued fiat currencies, like the Euro or the US dollar, and to discuss how they
emerge from the underlying technology. For this purpose, the example of two crypto currencies is used in
this paper. The underlying technology of most crypto currencies is blockchain technology. A blockchain
is a decentralized database that is distributed in the network on a variety of computers. It is characterized
by the fact that its entries are summarized and stored in blocks.

TIMELINE OF RBI AND CRYPTOCURRENCY

 In the last few years, India with a population that is over 1 billion strong has been experiencing
something of an economic renaissance. This was the degree to which the world developed that the
International Monetary Fund called it the fastest-growing developing economy. Over 40 per cent
of the country’s population has access to telecommunications and Internet services. A country
steeped in mystery, history and culture, when it comes to technological advancement, it’s not one
to fall behind either. Bitcoin and other cryptocurrencies traded throughout the nation for many
years now.

 The cryptocurrencies story began in 2008 when a paper titled “Bitcoin: A Peer to Peer Electronic
Cash System” was published by the name of Satoshi Nakamoto by a single or group of
pseudonymous developers. The real network only took some time to launch with the first transfers
that took place in January 2009. A year later the first actual sale of an item using Bitcoin occurred
with a user swapping 10,000 Bitcoin for two pizzas in 2010, which for the first time attached a
cash value to the cryptocurrency.
 By 2011, other cryptocurrencies started to emerge, all making their debut with Litecoin, Namecoin
and Swiftcoin. Meanwhile, the cryptocurrency Bitcoin that started it all began to be criticized
when reports arose that it was being used on the so-called “dark web,” particularly on sites like
Silk Road as a way of paying for felonious transactions. Over the next five years, cryptocurrencies
slowly
gained momentum with an increased number of transactions and Bitcoin’s valuation, the most
common cryptocurrency soared from around $5 in early 2012 to about $1000 by the end of
2017.
 Riding on the back of this popularity surge, multiple cryptocurrency exchanges started operating
in India between 2012 and 2017, offering much-needed depth and liquidity to the cryptocurrency
sector in India. Those included common exchange platforms like Zebpay, Coinsecure, Unocoin,
and usage by people outside the conventiona3l 4cults, authorities around the world started to
consider
 Koinex, Bitxoxo and Pocket Bits.
 India’s RBI released a press release warning the public against virtual currency mining, like
Bitcoin mining back in 2013. With the price of shooting up cryptocurrency and their increasing
acceptance

and usage by people outside the conventiona3l 4cults, authorities around the world started to
consider
this emerging development. RBI’s First Press Release warning consumers about Virtual Currency
Risks were:
 No central bank funds Digital currencies.
 Value is a question of speculation, not of an asset or a good.
 RBI has not permitted trading or the use of virtual currencies.
 RBI is in the process of reviewing the proposed regulatory structure for cryptocurrencies in
India and will give further directions based on their review.
 Prime Minister Narendra Modi announced a demonetization program initiated on November 8,
2016. The government’s decision to demonetize about 86 per cent of the country’s paper
currency sent shockwaves across India’s subcontinent. People with substantial cash reserves
wanted a new way to keep their capital without significant tax pressures and sundry policy
oversight. Buying massive orders of Bitcoin or other cryptocurrencies became standard practice
for others and then trading them at a later date. This meant that they circumvented what should
have been large taxation had they wanted to transfer their money into the financial sector.
 Transaction volumes and acceptance of cryptocurrencies in India picked up in earnest just after the
demonetisation of high-value currency notes in November 2016, with the government focus on
digital payments contributing to alternatives to mainstream online banking such as
cryptocurrencies pushing their way into public consciousness. Indian cryptocurrency exchanges
began to accumulate customers at a much higher rate than pushed up demand on all Indian
exchanges for cryptocurrency transactions.
 The 2016 demonetization policy may have sparked the adoption of cryptocurrencies among a large
portion of the population but soon realities started to surface that stifled the country’s market
development. Despite its large population, India contributes just 2 per cent of the overall global
blockchain industry capitalising. The small role that such a large economy plays can be attributed
to high cryptocurrency prices & government crackdown led by the RBI.
 In November 2017, under the chairmanship of Shri Subhash Chandra Garg, Director, Department
of Economic Affairs, Ministry of Finance and composed of Shri Ajay Prakash Sawhney (Director,
Ministry of Electronics and Information Technology), Shri Ajay Tyagi (Chairman, Securities and
Exchange Board of India) and Shri B.P, the Government of India formed a high-level Inter-
Ministerial Committee. The Committee’s task was to research different problems relating to virtual
currencies and to recommend concrete steps that could be taken in conjunction with them. In July
2019, this Committee submitted its opinion proposing a ban on private cryptography.
 Both the RBI and the Ministry of Finance released press releases in December 2017 advising the
general public about the hazards and threats associated with cryptocurrencies, with the Ministry of
Finance Press Release noting that cryptocurrencies are like Ponzi schemes, and also announcing
that they are not currencies or coins. It should be noted here that until the end of March 2018, the
RBI and the Ministry of Finance had released numerous press releases on cryptocurrencies
warning people against their threats but none of them either took legal action or gave enforceable
guidance against cryptocurrencies.
 On 1 February 2018: In the Union Budget Statement, Finance Minister Arun Jaitley said that
cryptocurrencies are not a legal tender and cannot be used as part of the payment systems. If
anyone does, the government will come down harshly and cryptocurrency won’t be permitted
because they can be used for illegal operation.
 The RBI directed banks to stop servicing cryptocurrency exchanges before there was a clear
policy in effect. The circular dated 6 April 2018, in which the RBI prohibited commercial and
cooperative banks, payment institutions, small financial institutions, NBFCs and payment system
providers from not only trading with virtual currencies themselves but also ordering them to avoid
offering services to all organizations dealing with virtual currencies. With immediate effect, all
licensed agencies have been barred from managing or delivering services to any person or
company dealing with or settling virtual currencies.

35
 The circular result was that cryptocurrency exchanges, which relied on conventional banking
networks to send and receive money to and from their customers, we’re unable to access any
financial services in India. It effectively crippled their business activities as turning cash into
cryptocurrency was an integral part of their activities and vice versa. And pure
cryptocurrency
exchanges that did not trade with fiat currency were unable to carry out their daily activities without
access to banking facilities, such as paying for office rooms, workers wages, storage space,
distributor payments, etc.
 RBI said the move was appropriate at the time to curb “ring-fencing” of the financial system in
the region. It has also claimed that it is not appropriate to view Bitcoin and other cryptocurrencies
as currency because they are not made of metal or reside in intangible shape, nor were they
stamped by the government. The central bank ‘s 2018 notice sent fear to many local startups and
firms providing cryptocurrency trading services.
 The Indian government has been debating “Banning the Cryptocurrency and Controlling the
Official Digital Currency Bill 2019.” The bill was introduced by the Interministerial
Committee (IMC), to research all facets of cryptocurrencies and make country
recommendations. Former
finance secretary Subhash Chandra Garg headed the committee. The Indian crypto group claims the
bill is flawed and has been lobbying for the IMC guidelines to be re-evaluated by the Government.
Since then, Garg has left his government job.
 In the face of the double impact of decreased trading rates and lack of access banking facilities, the
crypto-currency exchanges themselves find it difficult to maintain operations. In the face of such
an existential danger, members of the Internet and Mobile Association of India (IMAI) submitted a
written petition to the Supreme Court on 15 May 2018 entitled The Internet and Mobile
Association of India v. Reserve Bank of India.
 On 4 March 2020, the Supreme Court lifted the ban imposed on 6 April 2018 by the RBI in the
case entitled “Internet and Mobile Association of India (IAMAI) Vs Reserve Bank of India which
prohibited its regulated entities, such as banks, from trading in or facilitating banking transactions
in virtual currency (VC). Subsequently, the RBI published IAMAI ‘s circular request,
shareholders/founders of crypto-asset trading platforms, and real crypto-asset traders who were the
petitioners submitted before the SC. A three-judge Bench of the Supreme Court of India drafted a
Reserve Bank of India curricular,2018 which sought to prohibit banks and institutions from trading
in ‘virtual currencies’ — often referred to as cryptocurrencies, such as Bitcoin — and to provide
services to those engaged in trading in such currencies. The court order comes seven months after
an inter-ministerial committee has proposed banning cryptocurrencies, recommending instead to
introduce an official digital currency in the region.
 On many counts, they contested the RBI circular. Through that circular, the RBI had prohibited
banks from extending a range of services to facilitate the handling of cryptocurrencies by
individuals and entities. The list of such services included ‘keeping accounts, registering,
trading, settling, clearing, lending against virtual tokens, accepting them as collateral, opening
exchange accounts and transferring/receiving money in accounts related to the purchase/sale of
VCs.
 Justices Rohinton Nariman, Aniruddha Bose and V. Ramasubramanian set aside the 2018 RBI
circular, saying, “The impugned rule can not be considered to be proportionate.” Their
rationale was based on the fact that the RBI did not notice that virtual currency trading
practices did adversely affect the institutions it controlled. This was not banned in the region,
even as virtual currencies were not. “But the trade-in VCs and the working of VC exchanges
are sent by the impugned circular to comatose by disconnecting their lifeline namely, the link
with the normal banking system,” the order said.

36
LAWS RELATED TO CRYPTOCURRENCY

Guidance should be taken from other jurisdictions that have already had extensive discussions and workshops
on this subject while evaluating the legal approach on cryptocurrency. The U.S. The Uniform Law
Commission has drafted legislation on the issue, the ‘Uniform Regulation of Virtual Currency
Businesses Act’ (‘ULC Model Law’), after reviewing the opinions of policymakers, members of the public,
non-profit groups and leading leaders of the industry. Crypto-assets are a common phenomenon rather
than a regional authority, thus, making global precedents easy to apply to the Indian context.

The Prevention of Money Laundering Act (PMLA) is the definitive Indian law on
KYC/AML(Know your Customer/ Application lifecycle management). Crypto-asset undertakings may be
brought under the PMLA as any entity that is a ‘bank company, financial institution, intermediary or a
person carrying on a designated business or profession.’ In any event, the RBI has the power to prescribe
enhanced or simplified measures under the Prevention of Money Laundering (Maintenance of Records)
Rules to verify the identity of the client. Consideration of the type of customer, corporate arrangement,
complexity and importance of the transactions concerning the potential risk of money laundering and
terrorist funding.

The RBI will adopt a risk-based strategy and mitigate money laundering issues while preventing a full ban on
funding these businesses. This will require accountable and reputable businesses to work in a controlled
manner. The RBI Circular might not be appropriate for that approach. A new regulatory system will
require responsibilities for crypto-asset companies, such as financial adequacy, audits and monitoring. A
proposed licensing system will help to better safeguard customer safety.

Payment and Settlement System Act, 2007 – PSS Act Sections 10, 18, and 38 grant the RBI the
authority to create rules, directives, and guidance. That is, for example, the control the RBI uses to enforce
the Master Directive on Prepaid Payment Instruments. By this legislation, cryptocurrency trading sites can
also be put under a licensing regime under the PSS Act. The guidelines released by the Department of
Banking Regulation (DBR), RBI, on Know Your Customer (KYC)/Anti-Money Laundering
(AML)/Combating Terrorism Financing (CFT) shall extend mutatis mutandis to all agencies that issue
PPIs and their employees. This solution will require suitable exemptions in the RBI Circular, as RBI-
regulated organizations are currently totally barred from dealing with, or encouraging, virtual currency
trading under the circular.

Non-Banking Finance Companies (NBFC) – It puts crypto-asset market operation into a well-
established regulatory framework, which requires licenses, financial adequacy, KYC / AML laws, audits,
reports and other consumer-focused criteria. The business of an NBFC is defined in Section 45-I of the
RBI Act. An NBFC is defined as a variety of categories of ‘financial institutions’ excluding undertakings
of mainly buying or distributing products or delivering services and businesses collecting deposits as their
main business. This provision grants the RBI the authority to designate any class of entities as NFBCs,
with the prior approval of the Central Government. The RBI and the Central Government can, therefore,
consider NBFCs to be notifying entities carrying on ‘crypto-asset business activities’.

Consumer Protection Act, 2019 – Under Section 30A of the Consumer Protection Act, the National
Consumer Disputes Redressal Commission has the authority to make regulations “to provide for all
matters for which coverage is required or expedient to give effect to the provisions of this Act.” The
Consumer
‘defects’ in goods. The word ‘unfair marketing pract3i7ces’ requires a false or misleading
advertisement.
Protection Act 2019 protects consumers from ‘unfair trade practices,’ ‘deficiencies’ in facilities and

‘defects’ in goods. The word ‘unfair marketing pract3i7ces’ requires a false or misleading
advertisement.
Hence, the National Commission is open to developing laws (e.g., establishing a regulatory regime) taking
into account the crypto-asset industry’s specific consumer security issues. We suggest this path should
also be considered. As a result, customers have redress under the Consumer Protection Act, 2019 where
every crypto-asset company renders misrepresentations to customers or offers defective services.

Foreign Exchange Management Act,1999 – FEMA notes that ‘international currency’ is any
currency other than Indian currency. The currency of India is limited to any currency expressed in Indian
rupees. Consequently, if any crypto-asset can be used to “build a financial risk,” it will amount to
“international currency.” The RBI may control the drawing of these FEMA crypto-assets such that only
‘registered persons’ can trade in foreign currency. This would have the benefit of having an increasingly
well- established regulatory framework for those concerned with these forms of crypto-assets since they
will be subject to all the protections that apply to approved persons. Since certain crypto-assets are
called ‘goods’ under FEMA, the regulatory consequences under FEMA (e.g., export compliance) will
flow accordingly. However, the RBI did not explain the classification of crypto-assets under FEMA,
which confused the issue. The RBI can determine to amend the rules and guidelines on the sale and
import of products to clarify their operation concerning crypto-assets.

Information Technology Act, 2000 – Any providers of virtual currencies get information and
details about their customers. Platforms that allow credit card transactions in virtual currency must also
recognize these laws when processing information about credit cards. These data must be maintained and
stored with strict levels of confidentiality and security. Otherwise, the Virtual Currency provider can
violate data protection and security laws. The Information Technology Act reads with the Rules on
Information Technology, 2011 requires that all those responsible for using data follow strict rules. Such
laws require the fact and intent for which the information is gathered, the creation and dissemination of
privacy policy and the safeguarding of data. It establishes relatively strict cybersecurity standards for
every organizational entity managing confidential personal data, and the Central Government that, if it
seems appropriate, recommend clear additional steps for crypto-asset business activities. A new Data
Privacy Bill is set to be adopted, and when enacted, the same safety requirements will also be
recommended under this Law.

Credit Information Companies Regulation Act – There is some suggestion that due to its
tremendous growth, the Credit Information Companies Regulation (CICRA) Act, which became law in
India in 2005, is likely to be extended to cryptocurrencies. Since cryptocurrency networks are ubiquitous
for many activities such as processing, distributing, redeeming, trading, and exchanging cryptocurrency
values, the specifications of the CICRA Act may be implemented. According to this Act, Indian
individuals’ credit details must be obtained in compliance with such legislation as set out in this Act. In
the case of illegal data theft, organizations which collect financial information may be held liable.
Offshore financial transfers are very common in today’s cyberspace, so taking into account the vast
amount of persons involved with them, these activities are useful for the security of the individual’s
concerned personal data.

Prize chits and Chits Fund Act – Both the Prize Chits Act and the Chit Funds Act,1982 refer to the
idea of ‘monies’/’money’ and ‘cash’ in the terms ‘prize chit,’ ‘chit’ and ‘capital exchange scheme’ in
their meanings. Since crypto-assets are not technically ‘money’ under Indian law, these meanings must be
revised to include the word ‘valuable item’ (as used in Section 2(c) of the Prize Chits Act, so that, among
other valuable items, the aims of these Acts can be applied to the crypto-asset schemes.
Taxation laws – In the virtual currency business taxation legislation ranges from country to country.
Many countries place taxes on income produced by virtual currency transactions and some others have
only proposed taxation legislation. In India, where RBI notifies any such law, any trade therein would be
subject to the Foreign Exchange Management (FEMA) Act, 1999. Crypto-asset-related transaction taxes
would fall generally into two headings: Goods and Services Tax (GST), and Income Tax. The Crypto like
bitcoins is called a capital asset if bought for profit. Any income resulting from a bitcoin trade shall be
treated as a capital gain. 38
 IMPACT ON ECONOMY

The impact is of cryptocurrencies on the Indian economy is clearly depicted as the prices of
cryptocurrency market are now falling down. Indian government has made it clear with their stand of not
providing a legal status for cryptocurrency in India. The reason for this kind of a decision from
government hails from first, the challenge of monitoring the decentralized transactions in cryptocurrencies
are difficult to trace which could be advantageous for the hackers, criminals and also for terrorist
activities. The second reason being cryptocurrency market could be a leading competitor for the banking
service industry.Cryptocurrency like Bitcoin has become popular in India like other nations as the volume
of Indian rupee being traded in cryptocurrency have been at the highest post demonetisation. Researches
shows that the volume generated by the rupee dominated cryptocurrency is the third largest volume traded
after American dollar and yen.
The demonetization policy of 2016 may have encouraged the implementation of cryptocurrencies amongst
a substantial share of the population but realities rapidly began to come out that have subdued the growth
of the market in the country. In spite of its enormous population, India only contributes two percent of the
whole global cryptocurrency market capitalization. Cryptocurrencies in Indian context portrays few
Present and future of Cryptocurrency in India .Presently there is no regulation in India for
cryptocurrencies. The absence of a regulation certain bitcoin exchanges such as Unocoin, Zebpay, etc have
initiated their operation in trading or cryptocurrencies with Know Your Customer (KYC) norms. The
Reserve Bank of India initially was against the trading of cryptocurrencies in India, however in the year
2014 RBI showed its interest in block chain technology used by cryptocurrency to reduce the physical
paper currency circulation. In 2015, a financial stability report was published by RBI to identify the
importance of private blockchain. In 2016, ICICI bank with Emirates NBD (in terms of assets, one of the
largest banking groups in the Middle East) has executed transactions and remittance using block chain
technology. Then in 2017, a white paper has been issued by Institute for Development and Research in
Banking Technology (IDRBT) of RBI and also a pilot test was taken.

The Union finance minister in his Union Budget 2018 speech said, “The government does not consider
cryptocurrencies legal tender or coin and will take all measures to eliminate use of these crypto-assets in
financing illegitimate activities or as part of the payment system.” However, the government has
recognized blockchain and said that a “distributed ledger system or the blockchain technology allows
organization of any chain of records or transactions, without the need of intermediaries. The government
will explore use of blockchain technology proactively for ushering in digital economy.”

Though government is taking a cautious approach on cryptocurrencies, it is bullish on the use of

blockchain. Crytocurrency industry believes that blockchain and crytptocurrencies have to go hand in
hand. But unless and until a decentralised system is formed, it is as good as keeping track. If only block
chain technology is to be accommodated that just builds up a centralised system which gives authority to a
person or a body to rectify and modify it.
Experts and observers in the country hope and predict that the government will regulate cryptocurrencies in
India in different stages. This favourable and positive signs give hopes to the industry of cryptocurrency.
Mean while private companies dealing in cryptocurrencies have set up an association called, the Digital
Assets and Blockchain foundation
which has been engaged in educating the public on the advantageous and investment avenues in
cryptocurrency by conducting security checks, identification documents issued by the government,
Permanent Account Numbers (PAN) orAadhaar IDs.

As the arrival of internet, cryptocurrency also has a tremendous growth potential. With the help of both
these factors of internet and blockchain technology, in future there are probabilities of virtual banks in
owncryptocurrency named as ‘ Lakshmi’. 39
India. Hence to prove it on a positive note the Reserve Bank of India has taken initiatives to launch its

owncryptocurrency named as ‘ Lakshmi’. 39

India happens to be at a sweet spot of driving growth and innovation by landing a robust Digital Currency
Bill this year. In spite of the several rumors on a potential ban on crypto in India, there are multiple use
cases that could be considered by the policymakers who understand the true potential of leveraging crypto
and its impact on our economy.

Keeping in mind that our nation’s success in the past three decades has come from ITeS-based solutions,
if India is aiming to reach a $5 trillion economy, we cannot ignore the $1.7 trlllion market that exists for
cryptocurrencies. A forward-looking crypto policy can have a significant impact on improving our overall
financial infrastructure, help safeguard national security, deter financial frauds, strengthen our monetary
policy, attract international capital, create more job opportunities, and retain our tech talent to accelerate
technological development, thereby driving the nation towards becoming a global powerhouse.

We will need to prepare for the future and make adequate accommodations to safeguard our global
financial positioning. We also have to become ‘Atmanirbhar’ and reduce our dependency in situations like
the 2008 financial crisis or the 2020 COVID-19 crash. Cyberwarfare also poses a sizable threat in our
rapidly digitizing country. A decentralized financial platform could help India resolve such issues and
have an added advantage as these platform networks will not be blocked by any single state or country in
times of national distress or conflict. The other advantage here would be that if we could create our own
social networks on Ethereum, it would help build a decentralized ecosystem, which has its own positive
effects

40
INVESTMENT IN CRYPTOCURRENCY

41
 INTRODUCTION
If the mega cryptocurrency has left you nervous, especially if you are an investor in digital coins like
Bitcoin or Ethereum, hold your nerves as there is a silver lining in the mayhem the crypto asset class
experienced last week.

While the short volatile period has widely been touted as a course correction (one Bitcoin is currently
hovering around $37,000 after touching a record high of nearly $60,000 just a couple of weeks ago),
industry experts are of the view that staying invested and thinking long-term is the thumb rule to follow
for crypto investors in the country.
India is increasingly adopting Bitcoin and other cryptocurrencies. According to reports, the country
currently has more than one crore crypto investors, and the number is significantly growing every day
with several domestic crypto exchanges operating in the country.
Despite the Reserve Bank of India (RBI) being wary of cryptocurrencies, Indians are making a beeline to
invest in the digital coins, touted as the most important asset class of the 21st century.
According to Rahul Pagidipati, CEO, ZebPay, Indian investors are learning to view Bitcoin as an asset
class that belongs in every long-term portfolio.
"Indians own less than 1 per cent of the world's Bitcoin. Being left behind will create a strategic
disadvantage for the Indian economy. In 2021, we expect more institutions and government officials to
recognise that we need to close the Bitcoin gap," said Pagidipati.
In April 2018, the RBI ordered financial institutions to severe ties with individuals or businesses dealing in
virtual currency such as Bitcoin. However, in March 2020, the Supreme Court allowed banks to continue
handling cryptocurrency transactions from traders and exchanges, giving a respite to the crypto investors
In March this year, Finance Minister Nirmala Sitharaman said that all windows on cryptocurrencies will
not be closed down, bringing further relief to the stakeholders.
Earlier this month, RBI Governor Shaktikanta Das said that the central bank has flagged major concerns
over cryptocurrency to the government.
Amid the uncertainties lies the fact that a 40 per cent dip in the Bitcoin price from its all-time high looks
dramatic but is normal in many volatile markets, including crypto, especially after such a large rally, say
industry players.
"Such corrections are mainly due to short-term traders taking profits. Investors should invest in education
first. Research the underlying value of Bitcoin, Ethereum, and other crypto assets as you might look at a
company's information before buying stocks," said Avinash Shekhar, Co-CEO of ZebPay.
Buyers are aggressively accumulating more and more Bitcoins. This is the driving factor that has
propelled the price growth of the digital coin.According to Prabhu Ram, Head-Industry Intelligence
Group, CMR, if one were to look back at the last decade, such volatility is consistent and on par for
crypto.

"While over the short term, one may feel concerned, the long-term horizon view is positive. Going
forward, Bitcoin will continue to remain a small but significant investment in the investor portfolio," Ram
told IANS.

42
The key industry players feel that India is a tech and economic power that will emerge as a key player in
crypto and Blockchain adoption.
According to Sumit Gupta, CEO and co-founder of cryptocurrency exchange CoinDCX, cryptocurrency
has "now classified itself as a macro asset class for investments that can't be ignored.
"It will further lead greater mainstream acceptance than ever before," Gupta had told IANS.

INVESTORS IN CRYPTOCURRENCY

India has never been kind to cryptocurrencies, yet global investors have made huge bets on the country’s
digital coin ecosystem.
In November 2019, Binance, the world’s largest cryptocurrency exchange by trade volumes, acquired
WazirX, an Indian exchange, and last year, another Indian exchange, CoinDCX, secured financing
from Seychelles-based BitMEX and San Francisco-based giant Coinbase.

These investments happened despite the fact that for around two years starting April 2018, financial
institutions in India were restricted from providing services to crypto exchanges and their customers due
to a Reserve Bank of India order. This ban forced at least two crypto exchanges to shutter. And even now,
crypto exchanges in India are functioning without the services of banks.

But experts believe such investments are likely to continue coming into India.
“There is an increasing trend of foreign cryptocurrency exchanges investing in Indian cryptocurrency
exchanges. It is because India has a population of 139 crore that is predominantly young which is seen
as tech-savvy and more adaptable to crypto saving,” said Harish BV, co-Founder, Unocoin, which has a
userbase of 13 lakh in India. The median age of Indians is between 28 and 29 years.
In 2018, India’s then-finance minister Arun Jaitley had dealt a death blow to the future of
cryptocurrencies in the country. “The government does not recognise cryptocurrency as legal tender or
coin and will take all measures to eliminate the use of these crypto-assets in financing illegitimate
activities or as part of the
payments system,” Jaitley had said. Such remarks, coupled with the RBI ban, nearly drove the
Indian crypto ecosystem to death.

But in March 2020, when India’s apex court set aside RBI’s circular and allowed financial institutions to
engage in digital coin transactions, investors returned to the market with a vengeance.Within weeks of the
RBI ban lifting, trading volumes and new sign-ups on crypto exchanges went up multifold. Since then,
the volumes and userbase of these exchanges have expanded each month.

“We have been receiving investments consistently since our inception three years back,” said Sumit
Gupta, CEO and co-founder of CoinDCX. “Investors trust us despite the policy uncertainty. They have
seen, how we as a leading player in the industry have grown, and above all the Indian market does offer a
lucrative proposal for any investor.”
Experts assert that the demand for cryptocurrencies is booming and the untapped market potential is vast.
43
“While there is no official data on the number of crypto investors in India, exchanges like WazirX estimate
that 70 lakh-80 lakh investors are holding over $1 billion in crypto investments,” said Nicklas Nilsson, senior
analyst at GlobalData. “Industry estimates suggest a potential investor base of upwards of 10 crore. The
sheer size of the Indian market makes it an attractive option.
Besides the huge growth potential, what is driving investments into India is the huge cash reserves that global
crypto exchanges hold.
Rising revenues and investor financing mean that global giants are flush with cash, which they are using to
expand into newer markets and take advantage of various trends in the cryptocurrency space.

FUTURE IN CRYPTOCURRENCY

The use of Bitcoin and Ethereum could help strengthen India’s monetary policy and bridge the gap areas that
exist in the current fintech landscape. Crypto’s distributed ledger technology permits faster, direct
transactions by the users and also helps keep track of every digital transaction, which is far more advanced
and effective than existing protocols such as SWIFT. Secondly, Bitcoin can be used as an asset that
sovereigns use to complement their national digital currencies. It also reduces the burden on regulators by
allowing them to write programs that certify that financial actors are in complete compliance with the
regulators. We can avoid instances such as mortgage fraud and other fraudulent activities.

In other words, the evolution of Bitcoin and cryptocurrencies holds economic importance similar to the
internet in the 90s. The second unique crypto called Ethereum, which enabled smart contracts, gave birth to
an entire sector called decentralized finance (DeFi). DeFi is to build a multi-faceted financial system that
boosts the functionality and helps improve the legacy or the traditional financial system. DeFi alone has
created disruptions in the fintech space and, in the future, DeFi neo banks will play a pivotal role to
successfully bridge the gap between fintech and DeFi to attract new customers. Therefore, Blockchain- based
accounting holds the potential to empower regulators to monitor their activities and conduct risk management
seamlessly.

We are all aware of the devastating impact that COVID-19 has had on the Indian economy and the global
market at large. Despite this, crypto has been generating jobs across a variety of functions in India and abroad.
As of today, over 300 start-ups have generated tens of thousands of jobs and hundred-millions of dollars in
revenue and taxes. The ongoing development will inevitably lead to tech talent being engaged in India. Indian
youth seeks challenging opportunities to work on projects which are internationally competitive and also help
support improving our tech infrastructure.

In March 2020, two major events occurred which have boosted crypto adoption in India – i.e. the Supreme
Court’s historic verdict and the pandemic. WazirX completely caters to the Indian market and has seen
tremendous growth since then. Several Indians have lost jobs, and this has led them to invest in cryptocurrency
to earn a side income by becoming traders, technical analysts, or crypto influencers.
Globally, many institutional investors, including hedge funds in the US along with the giants like Square and
PayPal, are entering into crypto and are in a buying mode. This has also given a push to Bitcoin adoption.
44
 Data analysis of Bitcoin’s Growth

The above-mentioned chart of bitcoin growth shows that the growth of bitcoin over the years
has been tremendous since its inception.
Since it was first introduced, Bitcoin has had a choppy and volatile trading history. Bitcoin's
price has risen and fallen sharply over its short history. As an asset class, Bitcoin continues to
evolve along with the factors that influence its prices. Bitcoin's narrative has shifted, while it

45
is still a cryptocurrency, it also provides a way to store value, hedge against inflation and
market uncertainty, and allow investors to gain exposure to cryptocurrency within their
portfolios.
2012 proved to be a generally uneventful year for Bitcoin, but 2013 witnessed strong gains in
price. It began the year trading at $13.28 and reached $230 on April 8; an equally rapid
deceleration in its price followed, bringing its price down to $68.50 a few weeks later on July
4. In early October, Bitcoin was trading at $123.00; by December, it had spiked to $1,237.55
and fell to $687.02 three days later. Bitcoin's prices slumped through 2014 and touched
$315.21 at the start of 2015. Prices slowly climbed through 2016 to over $900 by the end of
the year. In 2017, Bitcoin's price hovered around $1,000 until it broke $2,000 in mid-May and
then skyrocketed to $19,345.49 on Dec. 15.Mainstream investors, governments, economists,
and scientists took notice, and other entities began developing cryptocurrencies to compete
with Bitcoin. Bitcoin's price moved sideways for the next two years with small bursts of
activity. For example, there was a resurgence in price and trading volume in June 2019, with
prices surpassing $10,000. However, it fell to $6,635.84 by mid-December.
In 2020 the economy shut down due to the COIVD-19 pandemic—Bitcoin's price burst into
activity once again. The cryptocurrency started the year at $6,965.72. The pandemic
shutdown and subsequent government policy fed investors' fears about the global economy
and accelerated Bitcoin's rise. At close on Nov. 23, Bitcoin was trading for $19,157.16.
Bitcoin's price reached just under $29,000 in December 2020, increasing 416% from the start
of that year. Bitcoin took less than a month in 2021 to smash its 2020 price record, surpassing
$40,000 by Jan. 7, 2021. By mid-April, Bitcoin prices reached new all-time highs of over
$60,000 as Coinbase, a cryptocurrency exchange, went public. Institutional interest further
propelled its price upward, and Bitcoin reached a peak of more than $63,000 on April 12,
2021.
By the summer of 2021, prices were down by 50%, hitting $29,795.55 at the lowest on July
19. Autumn saw another bull run in September, with prices scraping $52,693.32, but a large
drawdown took it to $40,709.59 about two weeks later.
On Nov. 10, 2021, Bitcoin again reached an all-time high, $68,990.90.In early December
2021, Bitcoin fell to $49,243.39 before fluctuating more as uncertainty about inflation
continued to spook investors alongside the emergence of a new variant of COVID-19,
Omicron.
Again in 2022 the market has seeing a down rally which can be said to be in a correction
phase post Covid.

46
 DATA REPRESENTATION OF MARKET CAPITALIZATION
OF CRYPTOCURRENCY MARKET VS BITCOIN MARKET

47
  DATA ANALYSIS OF MARKET CAPITALIZATION OF
CRYPTOCURRENCY MARKET VS BITCOIN MARKET

In April 2021, the Bitcoin market cap reached an all-time high and had grown by over 1,000
billion USD when compared to the summer months. The market capitalization decline since
that moment, reaching roughly 600 billion U.S. dollars in June 2021. Market capitalization is
calculated by multiplying the total number of Bitcoins in circulation by the Bitcoin price. The
Bitcoin market capitalization increased from approximately one billion U.S. dollars in 2013
to several times this amount since its surge in popularity in 2017.

While its market capitalization grew at an unbelievable rate from 2013 to 2017, the public is
only slowly becoming aware of its existence. As many as 25 percent of Americans were still
not familiar with bitcoin and as of 2019. While there are over 18 million bitcoins in
circulation, there are only 6,674 Bitcoin ATMs around the world. So its physical presence is
minimal, and the majority of ATMs are located in the United States.

Currently, Bitcoin has 42.49 percent of the market capitalisation, while other currencies
account for the remaining 57.51 percent. Ethereum has the second greatest market cap (18.31
percent), which is not nearly half that of Bitcoin. Tether came in third with 4.18 percent, and
BNB came in forth with 3.05 percent. USD coin at 2.79 percent, XRP at 2.06 percent, Terra,
Solana, Cardona, and Avalanche at 1.09 percent, 1.57 percent, 1.87 percent, and 1.02 percent,
respectively. As of 3rd March 2022 noon, the remaining 21.12 percent is made up of other
small players in the cryptocurrency market.

48
 CHAPTER 5

 RESULT OF STUDY

This study provided us with information on the impact of the pandemic on the cryptocurrency
market and bitcoin, market volatility, some technical analysis on the price moment, predicted
price climb and support on the charts, buyer and seller volatility in the market, and so on. It
also stated that the bitcoin market is in a correction phase, which means that prices will
remain volatile and in a low rally unless there is a dramatic shift.

 DISCUSSION OF STUDY

The study explored the changes, problems, and possibilities that cryptocurrencies have
experienced, with the goal of better understanding market volatility, patterns, and trends, as
well as the market capitalization of cryptocurrencies. India appears to be in in a bind in terms
of accepting cryptocurrency as a digital currency, with the government putting contingent
points on it in each budget.

49
 CHAPTER 6

 RECOMMENDATION

o India's market would be elevated to a new level if it had a robust legal standing and
regulatory authority.
o If cryptocurrencies can lower processing costs below those of existing payment transaction
fees, they will have a substantial impact on the electronic payments and they will be adopted
shortly.
o Financial literacy and understanding of how the Crypto market works, similar to mutual fund
awareness campaigns, would be recommended to the public at large.

 SUGGESTIONS

o Do your own research before investing

o Fundamental and technical analysis skills combined is beneficial
o The current crypto space is experiencing a massive pump. And this trend might lead to a lot
of volatility in the coming months when people start cashing out their holdings.
o Diversification is the key to sustain and success in the cryptocurrency market
o As an investor, your primary focus should be on knowledge building throughout the year.
Also, there will be platforms like CoinSwitch Kuber there to help with insightful listings,
trading tools, risk analyzers, and more.

50
 CHAPTER 7

 CONCLUSION

Bitcoin represents a technological advance in the processing of payments. It is always difficult to

predict the future, but technological advancements tend to be put to good use at least until
something better comes along. In my opinion, the long-run odds do not seem to favor bitcoin
or any other existing cryptocurrency, for that matter. One can, however, be reasonably certain
regarding the growth of electronic transactions. And if the blockchain technology
significantly reduces the costs of processing transactions, it will be adopted. Although
Bitcoins and alternative currencies have established their position and appeal in the market,
they are still regarded as a niche currency that cannot replace the existing ones.

 REFERENCES

1. Brito J, Shadab HB, Castillo O'Sullivan A. Bitcoin financial regulation: Securities,

derivatives, prediction markets, and gambling. Columbia Science and Technology Law
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J. 2014 doi: 10.2139/ssrn.2423461.
2. Bukovina J, Marticek M (2016) Sentiment and Bitcoin volatility (No. 2016-58). Mendel
University in Brno, Faculty of Business and Economics.
3. Cagli EC. Explosive behavior in the prices of Bitcoin and altcoins. Financ Res
Lett. 2019;29:398–403. doi: 10.1016/j.frl.2018.09.007.
4. Carrick J. Bitcoin as a complement to emerging market currencies. Emerg Mark Financ
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5. Raymaekers, W. (2015). Cryptocurrency Bitcoin: Disruption, challenges
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6. Dey, P. P. (2019). Cryptocurrency: Its Implications and. Evincepub Publishing, 142, 13-23.
7. Cumming, D. J., Johan, S., & Pant, A. (2019). Regulation of the crypto-economy: Managing
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8. www.investopedia
9. www.researchgate.net
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