Cryptocurrency, a digital or virtual form of currency utilising cryptographic techniques for transaction security, has reshaped traditional monetary systems worldwide. With no centralised issuing authority, cryptocurrencies operate on a decentralised system, recording transactions and issuing new units on a distributed public ledger called blockchain to record transactions.
Compared to the rest of the world and even India, it is still a relatively unknown commodity in Guwahati. Investors in Guwahati face challenges such as limited access to expert financial advice as it is still relatively a new topic.
A Delhi-based crypto user from Guwahati, who goes by the name “spiderpig” in the digital world, told GPlus, “Crypto does face restrictions from the Indian government, which is why I only withdraw small amounts to stay under the radar. If ever I need to withdraw a large sum, I take help from brokers. I transfer some of my digital wealth to the broker who exchanges them into cash for me. The problem in Guwahati is that there aren’t any brokers here that I know of.”
Another active crypto user from Guwahati, Rajveer Hagjer talking to GPlus said, “In Guwahati, cryptocurrency has seen growing involvement in decentralised finance (DeFi) applications. Tech and finance start-ups have also utilised blockchain for various purposes such as its use in supply chain management, record keeping and so on.”
However, Hagjer added, “Network connectivity issues and widespread digital illiteracy pose a major hurdle to secure cryptocurrency transactions. Also, like all other investments, investing in cryptocurrencies carries risks. This entails high volatility and potential external market changes that are dictated by the local and international financial landscapes.”
A senior banker, working for the State Bank of India, said that he doesn’t encounter crypto-related cases as such. Only once did he encounter a crypto case flagged for suspicions of fraud but it was later approved.
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Originally pioneered by Bitcoin in 2009, cryptocurrency has evolved into a diverse ecosystem comprising thousands of digital currencies Bitcoin, founded by Satoshi Nakamoto, remains the most well-known cryptocurrency, followed by Ethereum, Litecoin, and Ripple, who are collectively known as "altcoins,” offer unique features and functionalities. Ethereum, for instance, introduced in 2015, operates as a blockchain platform featuring its cryptocurrency, Ether (ETH), while Ripple offers a distributed ledger system facilitating various transaction types beyond cryptocurrency.
Users can acquire cryptocurrencies through mining or by purchasing them from brokers or dedicated cryptocurrency exchanges. Traditional brokers offer lower trading costs but fewer crypto features, while cryptocurrency exchanges provide a diverse range of cryptocurrencies and wallet storage options.
Cryptocurrencies have diverse applications, ranging from daily transactions to investments and remittances. While Bitcoin was initially envisioned as a medium for everyday transactions, its adoption for large-scale purchases remains limited. However, an increasing number of e-commerce platforms and luxury retailers accept cryptocurrencies as payment, expanding their usability.
Cryptocurrencies in India have faced a series of highs and lows, with the government oscillating between caution and acceptance. The Reserve Bank of India (RBI) initially raised concerns regarding the security risks associated with virtual currencies in 2013. Despite this, Indian banks continued to facilitate transactions on cryptocurrency exchanges, prompting further warnings from the RBI in 2017 regarding the risks involved.
By the end of 2017, both the RBI and the finance ministry issued a joint warning, clarifying that virtual currencies are not considered legal tender. The apprehension reached a peak in March 2018 when the Central Board of Digital Tax (CBDT) submitted a draft scheme for banning virtual currencies to the finance ministry. Subsequently, the RBI released a circular in April 2018, restraining banks, non-banking financial companies (NBFCs), and payment system providers from engaging with virtual currencies and providing services to cryptocurrency exchanges. This move caused trading volumes to plummet by a staggering 99%, dealing a severe blow to crypto exchanges.
In response, crypto exchanges filed a writ petition in the Supreme Court, challenging the constitutionality of the RBI circular. The apex court ultimately struck down the ban, reigniting the operations of cryptocurrency exchanges across the country.
However, the regulatory uncertainty persisted, and on January 29, 2021, the Indian government announced its intention to introduce a bill aimed at creating a sovereign digital currency while simultaneously proposing a blanket ban on private cryptocurrencies. In November 2021, the Standing Committee on Finance convened with representatives from the Blockchain and Crypto Assets Council (BACC) and other cryptocurrency stakeholders. Following extensive deliberation, the committee concluded that cryptocurrencies should not be outright banned but rather regulated to address concerns surrounding security, investor protection, and financial stability.
The surge of cryptocurrencies has prompted widespread adoption and recognition, with notable companies like Microsoft, AT&T, and Home Depot accepting digital currencies as payment for products and services. Luxury retailers and car dealerships have also embraced crypto transactions, indicating a growing acceptance of digital assets in commercial transactions.
However, alongside the meteoric rise of cryptocurrencies, the prevalence of cryptocurrency-related crimes has escalated. Cryptocurrency investments are susceptible to various risks, including market volatility, cybersecurity threats, and fraudulent activities. Cryptocurrency scams ranging from fake websites promising unrealistic returns to virtual Ponzi schemes have proliferated, posing significant risks to investors and underscoring the need for heightened vigilance among investors and consumers.
Despite the allure of blockchain technology's security features, cryptocurrency investments remain susceptible to hacking and lack regulatory protections comparable to traditional financial instruments. High-profile hacks have inflicted substantial losses on cryptocurrency exchanges and start-ups, highlighting the inherent risks associated with digital asset investments.
To mitigate risks associated with cryptocurrency investments, individuals should exercise caution when selecting platforms for purchasing and trading cryptocurrencies. Choosing reputable brokers or exchanges with robust security measures is essential. Additionally, implementing two-factor authentication and storing cryptocurrencies in secure digital wallets can enhance security and safeguard against unauthorised access.
As the cryptocurrency landscape continues to evolve, stakeholders grapple with regulatory challenges and strive to strike a balance between innovation and investor protection. Its adoption and evolution are accompanied by inherent risks, emphasising the importance of educating users and implementing robust security measures to safeguard investments and promote responsible usage.
With ongoing developments in blockchain technology and emerging applications, the future of cryptocurrencies promises to redefine the financial landscape, albeit amidst ongoing scrutiny and regulatory oversight. As cryptocurrencies and blockchain technology continue to evolve, stakeholders must remain vigilant and proactive in addressing emerging challenges and opportunities in the digital asset landscape.