LEGALITY OF CRYPTOCURRENCY
Cryptocurrency is one of its own kinds of a currency which is electronic or digital in nature. This particular feature of this digital/electronic currency makes it impossible for it to be forged and it also prevents the issue of double-spending. As the name of the currency goes it speaks about its basic characteristics by itself. The word crypto describes the encryption method that is being used to develop this currency and we also cannot leave the blockchain technology that is being used for the functioning of this currency on various other platforms. It also plays a pivotal role in securing the transactions that take place while the buying and selling of the cryptocurrency. Every transaction that takes place is encrypted which further makes it safer and a secured platform to use.
History of Cryptocurrency
The dawn of the concept of cryptocurrency took place way back in the year 1983 in the USA when a person named David Chaum developed the first-ever digital money called E-cash. In 1995, it was further implemented through Digicash and for this, the encryption method was being used. After 1995, this concept of cryptocurrency took a little pace and in the year 1998 Wei Dai came up with another type of electronic money known as b-money. Within a short period of time bit gold was also being introduced by Nick Szabo which also falls under the category of cryptocurrency.
Most of the cryptocurrencies today get the ground support from various types of suburbanized/decentralized networks which are further based on blockchain technology. One of the most unique features of cryptocurrency is that it is not being issued by any central authority which further prevents them from any interference by any third party and even by the government. So we can say that the entire system of cryptocurrency is based on the disparate network of computers. The digital transactions that take place are being denominated as virtual tokens which are being marked in the ledger entries which are built in the system.
Types of Cryptocurrencies that are being frequently traded off:
As of today the most famous cryptocurrency that is being transacted is bitcoin which was invented by an anonymous person by the name of Satoshi Nakamoto in the year 2009. Bitcoin is also the first-ever cryptocurrency which is based on blockchain technology. As of today, the total number of bitcoins issued is around 18 million and if we calculate the monetary value that all these issued bitcoins hold we come to an astonishing number of 214 billion dollars.
Cryptocurrencies actually promote the ease of fund transferring between the parties as it is not being issued by any central authority such as government authorities, banks and other financial institutions.
These transactions are being secured by various public keys, private keys and other forms of incentive systems like proof of work and proof of stake.
The latest version of cryptocurrencies users wallet or account address has a public key and the private key is with the owner and is being used by the owner to sign the transaction.
All the transfer payments take place with less processing fees as compared with the other online transactions that take place through banks and other credit card companies.
The anonymous nature of cryptocurrencies has always been the epicentre of the controversies faced by the cryptocurrencies as most of the countries believe that investment in cryptocurrencies may lead to money laundering and tax evasion.
Most of the countries even believe that due to the anonymous nature of the cryptocurrencies the money that is invested can be used illegally to finance terrorist activities.
The legality of Cryptocurrency in India
In India, the RBI has the authority to formulate the policies regarding the banking and various other transaction services that are provided by banking and non-banking companies. In the year 2018 RBI imposed a ban on the trading of cryptocurrencies, due to its anonymous nature as it was also believed by the RBI that cryptocurrency transactions may promote illegal activities like money laundering and tax evasion. The Central Bank also stated that it may also attract cyber-crime such as hacking which will further lead to data theft. However, the Supreme Court lifted the ban on the trading of cryptocurrencies on 4th March 2020, where it also stated that cryptocurrencies though can be traded but cannot be used as a legal tender. After the decision of the Supreme Court central bank has decided to file a review petition so that the ban on cryptocurrency can be reinstated.
ABOUT THE AUTHOR:
Kshitij Chauhan is from School of Business Management, NMIMS Mumbai.
You can contact him at linkedin.com/in/kshitij-chauhan-714506116
Editor: Rudra Prasad
Disclaimer by Legal Armor:
We at Legal Armor do not endorse the Authors' views and are in no way responsible for the said views. We are just publishing the Write-ups as blogs with just light editing, and are in no way responsible for any legal claims. Legal Armor shall not be liable for any plagiarized content.