Current scenario:

Cryptocurrency as a form of decentralized digital money works on the principle of blockchain technology, and especially within it, Bitcoin & Ethereum are the most popular among the world though the market of cryptocurrencies constitutes of more than thousands different types of such currencies in different parts of the world.

Investing in cryptocurrencies by Indians is a very riskier decision, not only because of it’s high end volatility, but also because of lack of any formal regulations or law by RBI and Central Government  (CG) governing their mechanism.

Cryptocurrencies can be used as a form of medium of exchange, or a source of investment or its mixture, but unless and until we have a regulation governing the same, they are almost equal to gambling.

Though there might not be any official data from RBI and CG, but if we look at the data released from crypto exchanges recently, close to almost 1.5 crore Indians have invested or are investing at present in various cryptocurrencies together holding more than thousands of crores of rupees, and exchanges like CoinSwitch Kuber, WazirX, and many others are seeing a constant increase in demand of investing in such currencies.

But when all of this is happening at one side of the circle, the other side has something different to say. Though from past six months, cryptocurrencies demand are rising like a rocket eager to touch the sky and move beyond it and at the same time also facing a huge downgrade recently also, but what our Indian regulations have to say is very much important here.

RBI in the year 2018, have banned all banks from dealing in such currencies but a Supreme Court order reversed such ban because of the plea filed by Internet and Mobile Association of India. Herein the court though recognized that RBI as a central regulator of currencies have such power to regulate virtual and digital currencies, but because of any regulation or law being absent here, the business of dealing in cryptocurrencies is protected under Article 19(1)(g) of our Constitution that guarantees right to carry on trade, occupation or business.

Reasons of Buying Crypto:

There is no doubt that with the interest rate decreasing continuously, the bank deposits are becoming slowly and slowly an unattractive or a lucrative source of investment by investors, adding up the recent scams that have happened in PNB and Yes Bank, along with PMC Bank have raised the concerns and security issues regarding investment in Bank; and at the same time having a high end volatility with slow environment have also made Real Estate and Mutual Funds businesses reducing their investors, though looking at the ground reality, the demand of real estate is increasing but again the major issue being standing unresolved is that the demand of home by buyers and simultaneous supply by sellers are not actually matching the needs of the hour, and that’s why many of the investors now are looking to test their luck in crypto market, as it is slowly and steadily becoming a very popular yet potential source of investment, like gold or real-estate.

Future Ahead:

Lack of regulation clearly signals that such investment is highly risky, and it can happen that if central government now bans such investment formally, then holders holding such currencies will be left with just a mere digital plastic currency with actually no real monetary value, as the same was happened during demonetization wherein the old notes after a complete ban became a mere piece of paper in just few hours. Moreover, cryptocurrencies are not backed by any underlining asset, so completely treating as a source of exchange may not be practically possible or feasible. With the motive of centralization in banking sector being slowly becoming a reality or soon to be a reality in India, the existence of cryptocurrencies being controlled completely in a decentralized manner face a bigger challenge, and moreover, the Banks at present are also not in such position to hold any firm opinion regarding crypto as there has been no official announcement or any take by RBI, but our past experiences suggests us that we have faced thousands of crores of losses as an investors whenever we have tried to invest in such scheme or sector that stands un-regulated by Central Regulator (RBI), for e.g. Chit Funds scam, especially PACL scam, Saradha Chit Funds scam, etc. being one of the biggest chit funds scams that happened in India. Another example can be of Micro-finance, for e,g, the same that happened in Andhra Pradesh in the year 2010, though RBI at later stage brought in fresh regulations to govern the same.

Therefore the uncertainty lying along with the high volatile risk of investing in this type of currency market is a call of individual investors on case-to case and person-to-person basis, unless and until the central regulator & central government comes up with an official law that governs cryptocurrencies in India.

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Disclaimer:- The entire contents of this document have been prepared on the basis of relevant provisions and rules and as per the information existing at the time of the preparation, and the views expressed  here are personal in nature. Although care has been taken to ensure the accuracy, completeness and reliability of the information provided, I assume no responsibility therefore. Users of this information are expected to refer to the relevant existing provisions of applicable Laws. The user of the information agrees that the information is not a professional advice and is subject to change without notice. I assume no responsibility for the consequences of use of such information.

Author Bio

Qualification: CS
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Location: Shubham Phophalia, Gujarat, India
Member Since: 08 May 2021 | Total Posts: 54
I am Shubham from Batch 2016-21 of GNLU. I am in my final year of 5 years integrated BA LLB course from GNLU, Gandhinagar, and I have completed Company Secretary Course meanwhile with 3rd Rank in Ahmedabad, Gujarat in CS Professional. I am a keen reader and enthusiastic listener of Corporate laws an View Full Profile

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