What is Cryptocurrency?
A cryptocurrency is a digital currency. They are a digital currency that allows people to make payments to each other directly through an online system. Cryptocurrencies have no legal or intrinsic value; they are only worth what people are willing to pay for them in the market. This differs from national currencies whose value is created as legal tender. Cryptocurrency is not meant to be in physical form, so it is not usually issued by a central authority. Cryptocurrencies typically use decentralized governance instead of a central bank digital currency (CBDC). Decentralization means that transactions take place without a central authority or intermediary such as a bank or government. It also means that accounting is accessible to all, which ensures transparency and prevents fraud.
How Cryptocurrency does work?
Cryptocurrencies run on a decentralized public ledger called the blockchain, which is a record of transactions updated and maintained by all currency holders. This ledger records transactions related to a range of assets, like money, house, or even intellectual property. Blockchain is like a digital blockchain where each block contains a list of transactions. Many computers in the network (called nodes) confirm each transaction in a block. Once a block is confirmed, it is added to the chain. Since each block is connected to the previous one and controlled by multiple computers, it is almost impossible to change the transaction history. This ensures the security and reliability of accounting.
What can be done with cryptocurrencies?
You can buy, sell, or trade them on the stock market. You can also use them to buy goods, invest, or send money around the world quickly and with low fees. Popular examples are Bitcoin and Ethereum.
Advantages and disadvantages of cryptocurrency in India
Cryptocurrency in India provides Financial inclusion, Safety towards inflation, remittance benefits, new funding avenues, Speedy transactions, and decentralization. However, it faces regulatory challenges, volatility, fraud risk, energy consumption, and effects on conventional banking. The Supreme Court ruling and authorities policies form the destiny of cryptocurrency in India.
Cryptocurrency Regulations in India
In India, cryptocurrencies occupy a unique space, both fascinating and enigmatic. Both individuals and companies were interested in them.
- The main cryptocurrency regulators in India are the Reserve Bank of India (RBI), the Ministry of Finance, and the Securities and Exchange Board of India (SEBI). Cryptocurrency is a digital form of exchange.
- Unlike traditional currencies issued by central banks such as RBI, cryptocurrencies operate on a decentralized blockchain system.
- Cryptocurrencies are not tax-free in India. The Union Budget 2022 introduced a 30 percent tax on profits from the sale of virtual digital assets (VDA) such as cryptocurrency.
- Additionally, a 1% Income Tax Deduction (TDS) applies to crypto transactions above a certain amount.
Conclusion
Cryptocurrency is gaining popularity in India, but there are issues like unclear rules and security issues. While there are opportunities for financial inclusion and investment facilitation, India needs to create clear rules, train people, and improve technology.
The government is exploring Web3 and blockchain for innovation. Balancing new ideas with the right regulations is the key to the safe and successful use of cryptocurrency in India.