CRYPTOCURRENCY: TWO SIDES OF THE COIN  

THIS ARTICLE WAS WRITTEN BY SNEHA GHOSH, A STUDENT OF SYMBIOSIS INTERNATIONAL UNIVERSITY. 

“Bitcoin is exciting me, because it shows how cheap transactions can be.”– Bill Gates

Introduction

With rapid technological advancements, digital currencies are promptly making their presence felt in the global market. Cryptocurrency being the flag bearer, is the talk of the town and has only been growing at an accelerating rate since 2015. Crypto has amassed a rather huge fanbase, who see it as a beneficial investment perhaps as the future, to which India contributes its fair share of people. The total crypto holdings have been estimated at 400 billion Rupees while the total number of cryptocurrency investors in India range between 15-20 million. Thus, this article talks about the pros&cons of cryptocurrency, nuances of the much-anticipated crypto bill and need for clear legislation with regards to the legality of cryptocurrency in India.

What is Cryptocurrency?

Cryptocurrency is a sort of digitalized money or asset which is created and circulated by the process of cryptography. It is created using intricate computerized codes thus marking a distinction from fiat currency like metal coins or paper money. It is rather intangible and can’t be touched or stored physically like regular currencies. “It is a digital currency, which is an alternative form of payment created using encryption algorithm”. It is not controlled by any single entity but by a decentralized system of data ledgers and blockchains. Looking to buy or sell cryptocurrency, please visit bitcoinxxo.com

Merits of Crypto

Cryptocurrency, is made up of complex computerized codes unlike conventional currencies which are made of exhaustive natural resources like paper or metal. Crypto thus proving to be a cleaner and greener alternative. Moreover, they are decentralized digital assets rather than being controlled by any one organization or the government, which subsequently prevents monopoly by any singular party and also provides democratic control and financial sovereignty to each and every investor since there are no discrepancies and external source interfering and manipulating the currency. In other words, the investors are in control of their own money, making it an attractive option in the market.

  Crypto also possess the power to fight inflation, which has declined the value of many currencies in the past since  it is only present in a limited quantity and the best part being that such data and figures are easily accessible to the common public so experts and scientists can predict if an economic catastrophe could occur and warn us accordingly but when it comes to conventional money such information is usually kept private by the government and thus we come to know of such an event only at the eleventh hour. Almost all cryptocurrency, are released with a fixed amount. For example, only 21 million Bitcoins have been released worldwide. So, as the demand increases, its value will increase which will keep up with the market and, in the long run, prevent inflation.

 The blockchain ledger is based on different mathematical puzzles, which are hard to decode making cryptocurrency more secure than ordinary electronic transactions. They don’t demand personal information for transactions rather use pseudonyms unrelated to the actual data of the user. Therefore, lessening the risk of having personal details stolen or money retracted after it has exchanged hands. It’s also safer as compared to fiat currency which can be easily stolen or robbed off from 1’s hand.

 With the help of different cryptocurrency wallets and exchanges, one currency can be converted into the other by trading and with minimal transaction fees.

Another major advantage is that the cross-border transaction fees paid by a user is reduced significantly, by eliminating the need for third parties, like VISA or PayPal, to verify a transaction.

Today when a man is always in a race against time the quick and efficient peer-to-peer system, fully operational around the clock proves to be a great help as transactions in cryptos whether domestic or international are lightning-fast since the verification process needs very less time.

Demerits of Crypto

As it is famously said, “Every Pros has its Cons”  the usage of crypto also comes with its own problems, rather unique in nature.

Since the transaction in cryptocurrency are virtually undetectable, they are ripe for criminal activities like money laundering, tax-evasion and potentially even terror-funding. It is also extremely volatile in nature, compared to other forms of investments like stock marketing; which means “one is as likely to lose everything they invest as one is to make any gains”. The more the volatile something is the higher the risk is associated with it as it has higher potential for rising or falling prices, over shorter time periods.

Due to the invisible nature of cryptocurrency, transactions or exchanges dealing with them are untraceable by the Government or any third party creating a leeway for corporate frauds, giant scams and what not as no real records of the dealings can ever be maintained or presented as evidence in the court of law.

Furthermore, transactions in cryptocurrency are irreversible so if there is a disagreement between the parties involved, or if someone transfers funds to the wrong wallet address, it cannot be retrieved by the sender. Since there are no royalties, a payment might be generated for goods or services that was never obtained. Many people also turn their black money into lawful remuneration, as it gets converted by a trusted intermediary thereby also masking its source.

Crypto Tax: What it Means

The recent taxation of crypto transactions has seemed to popularized a wrong notion that the Indian government has legalized cryptocurrency as a legitimate tender. Though, in reality the legal status of cryptocurrency still remains hazed until it gets formally declared as legal or illegal.

There was much anticipation around the alleged crypto bill which would be ultimately legalizing crypto, since investors say imposing tax was a positive move in this direction. But it has been reported from some government sources that introduction of the bill in the winter session of the parliament has been halted. The government is now expected to introduce the crypto bill during the Budget session, which runs from January 31 to April 8.

Nevertheless, if Crypto gets adopted as a legal tender in India, it would be the second country worldwide after EL Salvador to do so, setting an example for other nations.

“The proposed section 115 BBH seeks to provide that where the total income of an assessee includes any income from transfer on any virtual digital asset at the rate of 30 percent and the amount of income-tax with which the assessee would have been chargeable had the total income of the assessee been reduced by the aggregate of the income from transfer of virtual digital asset.” – Budget 2022 Memorandum

The government may levy a tax on Indians who trade in cryptocurrencies in case, they are not restricted. The government may consider imposing TDS (tax deducted at source) and TCS (tax collected at source) on cryptocurrency sales and purchases above a certain level. If this occurs, it will aid the authorities in identifying and tracking the investment.

Regularization & Legalization: Need of the hour

Currently there are no regulatory bodies, or adequate laws monitoring trading, selling or buying digital coins which makes them appear as an unreliable asset to the orthodox masses. Also it broadens the scope of malpractices in the field simultaneously lessening the remedies and grievance redressal mechanism for aggrieved (since the entire ambit of digital currencies cannot be covered by the IT Act- 2000 and other cyber laws present in India).

In order to ensure the smooth function of crypto currency, there needs to be a regulatory body as it would spread awareness about the risks, performances and potential of digital assets and allow the entry of selected cryptocurrencies it would also keep a check on the volatility, money laundering and other fraudulent activities thereby ensuring the safety of its investors.

Moreover, we saw what the world went through for the past two years and how severely the lockdown has affected our economy, which was on the brink of collapsing, which is still in the recovering stage and God forbid but another such lockdown can send it tumbling down into a situation similar to the great depression. reduced functionality of the banks had a huge role to play cryptocurrency being mostly digital and automated would prevent such a situation in the future.