EMERGENCE OF CRYPTO CURRENCY AND ITS IMPLICATIONS FOR INDIA: A CONCEPTUAL STUDY

Abstract

In spite of being the latest buzzword- Crypto Currency, even after over a decade of its existence, the concept is still in its infancy. The complexities of economy hardwired into the central banking system, threatened authorities including political as well as economic, are already trying to either destroy the same or to control it in the manner they do with fiat money. There is lot of talk involving the concepts of crypto currencies and the underlying block chain technology, however there seems little understanding of the concept as such, and even less as to the applicability of the concept. It truly has the potential to completely replace the existing financial system but there are dangers of adoption of the new technology and genuine concerns of the skeptics. Crypto currency is a completely virtual currency derived using cryptographic methods which cannot, under any circumstances, manifest itself in physical form. More important than the currency, it is the underlying block chain technology, based on the system of absolute, mutual and decentralized trust, which is being talked about in a more accepting manner. However, both are like Siamese twins, conjoined together at a fundamental level, and as of now it seem impossible to accept one without the other. The block chain technology was the hidden underdog in this entwined concept when it was floated for the first time in 2008 by Satoshi Nakamoto. While the white paper by Satoshi aimed at the first crypto currency i.e. Bitcoin and its conceptual promotion, it’s the block chain which has helped in the wider acceptance of the concept, at least theoretically. Central banks across the world showed initial reluctance towards the acceptance of crypto currencies. As block chain technology emerged into the scene, with applicability across a multitude of industries, slowly but gradually lots of central banks and governments have opened up to it. While most such governments are still trying to understand the disruptive technology, they are also trying to regulate the same in ways they know. However given underlying technology, all such efforts may not achieve worthwhile results. Such a V technology aims to change the very nature of economic equilibrium all around for all stakeholders. Hence the run-of-the-mill regulations would create more friction than smoothen out the issues in wide acceptance of the same. Though the crypto currencies like Bitcoin had gained temporary association with fraudulent activities, these are few and far in between. The advantage this new tech offers far outweighs the problems with it. Definitely there would be a need to regulate the same, it would need a whole new approach and understanding to think and implement regulations for the same. Reserve Bank of India (RBI) had declared the transactions involving crypto currencies in India as illegal. However there has been no study, by any government office, which has been carried out in the field, which could support the ban thus imposed by the central bank in India. This ban has over the years, while rest of the world moves ahead to embrace the tech, may have had a detrimental effect on the Indian economy. However there is no denying the fact that this new technology needs to be studied in greater detail and understood much better at the conceptual level first before moving onto the implementation and regulation stage.