Project Report

On
A Study on evolution of cryptocurrency

Submitted in Partial Fullfilment of the requirement for the

Award of the Degree of

Bachelor in Business Administration (General)

To
Guru Gobind Singh Indraprastha University, Delhi

Submitted To: Submitted by:

Mrs. Komal Khatri Name- Kritika Kumar
(Faculty Guide) Class & Sec- BBA(G) , B

Enrollment No - 08521201721

BATCH 2021-2024

DEPARTMENT OF BUSINESS ADMINISTRATION

Maharaja Surajmal Institute

Recognized by UGC u/s 2(f), NAAC Accredited ‘A’ Grade

Affiliated to Guru Gobind Singh Indraprastha

University,Delhi

C-4, Janakpuri, New Delhi-110058

1
 Certificate

I, Ms. Kritika Kumar, Roll No. 08521201721 certify that the Minor Project Report (Paper Code:
114) entitled A Study on evolution of cryptocurrency is done by me and it is an authentic work
carried out by me. The matter embodied in this has not been submitted earlier for the award of any
degree or diploma to the best of my knowledge and belief.

Signature of the Student

This is to certify that Project Report entitled “A Study on evolution of cryptocurrency” which is
submitted by Kritika Kumar in partial fulfillment of the requirement for the award of degree
Bachelor in Business Administration (General) to Maharaja Surajmal Institute Affiliated to
Guru Gobind Singh Indraprasth University, C-4, Janakpuri, New Delhi-110058 is a record of
the candidate own work carried out by him under my supervision. The matter embodied in this
report is original and has not been submitted for the award of any other degree.

Mrs. Komal Khatri

(Assistant Professor)

2
 ACKNOWLEDGEMENT

I offer my sincere thanks and humble regards to MAHARAJA SURAJMAL INSTITUTE, GGSIP
University, New Delhi for imparting us very valuable professional training in BBA

I pay my gratitude and sincere regards to “Mrs. Komal Khatri”, my project Guide for giving me
the cream of her knowledge. I am thankful to her as she has been a constant source of advice,
motivation and inspiration. I am also thankful to her for giving her suggestions and encouragement
throughout the project work.

I take the opportunity to express my gratitude and thanks to our computer Lab staff and library
staff for providing me opportunity to utilize their resources for the completion of the project. I am
also thankful to my family and friends for constantly motivating me to complete the project and
providing me an environment which enhanced my knowledge.

Kritika Kumar
08521201721
BBA(General), Second Shift

3
 TABLE OF CONTENTS

S.No. Particulars Page number

1. INTRODUCTION TO 7
CRYPTO WORLD
1.1 FINDINGS 8

1.2 LIMITATIONS 10

1.3 TEN IMPORTANT 11

CRYPTOCURRENCIES
2. HISTORY OF 14
CRYPTOCURRECY
3. COMPONENTS OF CRYPTO 17
WORLD
4. OBJECTIVES OF 21
CRYPTOCURRENCY
5. LITERATURE REVIEW 23

6. SWOT ANALYSIS 27

6.1 BENEFITS OF 29
CRYPTOCURRENCY
6.2 CRITCISM OF 30
CRPTOCURRENCY
7. CRYPTOCURRENCY IN 33
INDIA
7.1 LAWS RELATED TO 37
CRPTOCURRENCY
8. IMPACT ON ECONOMY 41

9 PERCEPTION OF OLDER 44
GENERATIONS
10 IMPACT OF 46
CRYTOCURRENCY DURING
COVID-19
11. FUTURE SCOPE OF THE 50
STUDY

12. RESEARCH 52
METHODOLOGY

4
13. FINDINGS AND 54
CONCLUSIONS

14. BIBLIOGRAPHY 57

5
 CHAPTER - 1

INTRODUCTION OF

CRYPTOCURRENCY WORLD

6
In this topic, we will be studying about the sudden increase in interest of the youth
into cryptocurrency. We have noticed a clear change of interest among youth about
cryptocurrencies and their views about it.

According to the 2021 data, 32.21% of traders are reportedly 18-24 years old while
another 32.76% are in the 25-34 age group. This trend continues with the next largest
share belonging to the 35-44 range at 16.42%, nowhere close to the two previous
groups. The succeeding age groups then come in at 9.21% for 45-54, 5.65% for 55-
64, and a mere 3.75% for traders age 65 and above. The majority of crypto traders
reside within the age range of 18-34 years old. This shows us that the majority of
active traders mostly come from the younger generations.

Younger generations are growing up with all these technologies that cryptocurrencies
rely on. The Internet, smartphones, and computers were all invented before or around
the same time as these generations, meaning that they were exposed at a much earlier
age.
This exposure would lead them to be more adaptable to these technological
advancements. Unlike those from the older generations who have to learn how to use
an app before they can do anything profitable.
Over the past three decades, the world has seen more than a few financial recessions
and general economic difficulties. Even if they weren’t born during the worst of these
difficulties, they would have grown up hearing stories from their parents or older
siblings.
All this has led to the current generation developing a lack of trust in traditional
financial institutions. Where before leaving your money in the bank might have
earned you a decent profit, nowadays that isn’t enough. The youth of today
understand that they need to be more proactive when it comes to their financial future.

The decentralized nature of cryptocurrencies thus makes sense as a viable option for
these younger generations. This way, they avoid regulated, centralized institutions and
instead invest in cryptocurrencies that do not benefit just one entity.

7
FINDINGS OF CRYPTOCURRENCY-

The cryptocurrency was first mentioned in 1989, and a few years after in 1980,
American cryptographer David Chaum invented digital cash, which relied on
cryptography to secure and verify transactions. But it was only in the early 1990s that
cryptographic protocols and software began to be developed that would make possible
the creation of a truly decentralized digital currency.

In October 2008, a paper by Satoshi Nakamoto (a pseudonym) titled Bitcoin: A Peer-

to-Peer Electronic Cash System outlined a system for creating a digital currency that
did not require trust in any third party. Nakamoto’s paper effectively launched the
cryptocurrency revolution.
Bitcoin is a cryptocurrency and worldwide payment system. Satoshi Nakamoto
created the Bitcoin protocol in 2009, the same year it launched as open-source
software. Bitcoin has become increasingly popular with people who need to send
money across borders without interference from banks or governments. Still, its rapid
rise in value has made it difficult for some people to know what they should do with
their Bitcoins.

The first Bitcoin transaction took place between Nakamoto and Hal Finney on 12th
January, 2009. It wasn’t until February of the following year that someone realized
how valuable this new technology could be when one person paid 10,000 Bitcoins for
two pizzas delivered by Papa John’s. That transaction would now be worth millions of
dollars.

The initial Crypto Market Development

In early 2010, Bitcoin was the only cryptocurrency in the market. At that time, its
price was just a few cents. Over the next few years, new digital currencies entered the
market, and their prices rose and fell along with Bitcoin’s.

Throughout this period of volatility, many people lost faith in cryptos as an

investment vehicle. However, beginning in late 2017, cryptos began to see
unprecedented growth. The total market cap for all cryptocurrencies reached $820
billion in January 2018 before crashing later that month. Despite this crash, the crypto
market has seen steady growth throughout.

The Era of Crypto Scams

2017 was the year of cryptocurrency. As the value of Bitcoin and other digital coins
skyrocketed, so did the number of schemes and scams targeting crypto investors.
From fake initial Coin Offerings (ICOs) to phishing attacks, thieves managed to steal
millions of dollars from innocent people looking to make a quick buck in the crypto
craze. With regulators aiming for the cryptocurrency world, 2022 will likely see even
more scams surface.

Bitcoin’s Rise To Popularity

8
Bitcoin has been the subject of many discussions and debates, but it isn’t easy to
pinpoint when Bitcoin first became popularized. Many believe that Bitcoin’s rise was
in 2017, increasing from $1,000 to $20,000 before crashing back down below
$10,000. Others argue that Bitcoin’s popularity skyrocketed due to cryptocurrency
exchanges like Coinbase, making it easier for people with limited technical
knowledge or experience to trade cryptocurrencies.

Whatever the reason may be, one thing is certain: Bitcoin’s popularity will continue to
grow as more people become aware of what it stands for – decentralization and
anonymity.

Bottom Line
The cryptocurrency market is booming, and it’s only expected to get bigger. As the
digital economy continues to grow at an astronomical rate, cryptocurrencies are sure
to play a large role in what makes up our future money system.

Today, there are many different types of cryptos; some have proven more stable than
others while still having promise for growth. Take time this week to learn about these
fascinating currencies

9
LIMITATIONS OF CRYPTOCURRENCY-

Strong volatility – almost all of the ups and downs of the BTC value depend directly
on the declared statements of the governments of different countries. This volatility
creates the problem in the short term. Large risks of investing in cryptocurrency that
should be considered in the medium and long term. It is our opinion that the list of
cryptocurrency (bitcoin) disadvantages are much longer, and are related to risk of
money laundry, terrorist and other illegal activity financing, lack of a central issuer,
which means that there is no legal formal entity to guaranty in case of any bankruptcy,
and alike. However, although it is very difficult to predict, many academics and
professionals of this topic claim that the future of cryptocurrencies is bright since it
will remove trade barriers and intermediaries, it would decrease the cost of
transactions, and therefore boost the trade and the economy. Nevertheless, we should
consider and pessimistic voices in the academic world as 39 well, suggesting that the
high risk of volatility, hacking risks, and lack of institutional backup makes the future
of cryptocurencies not very optimistic.On the other side the opponents of
cryptocurrencies claim that cryptocurrencies are very volatile, can be used for money
laundry or financing illegal activities. In this regard, Tymoigne (2015) for example, is
not enthusiastic over cryptocurrency use, providing reasons why he believes bitcoins
are not a viable electronic currency. He notes that bitcoins are illiquid and have shown
high price volatility, and that the discounted cash value of a bitcoin is zero. He further
observes the currency lacks a central issuer, and that there is no financial or economic
basis for its creation.
The paper aimed to provide analysis of cryptocurrency use in general and of the
bitcoin in particular. Our empirical research found that the future of cryptocurrencies
could be bright if some institutional – formal conditions are fulfilled. The advantages
of cryptocurrency use in facilitating trade, cost reduction, and alike, are recognized by
majority of academics. Bitcoin and other cryptocurrencies have the potential to
replace traditional and new payment methods. But to achieve that and become a
dominant power in global system of payments, they must provide distinctive
incremental value, to address and overcome a number of critical challenges, such as
formal regulatory issues. That is unlikely to happen in the short time period. But
banks should look closely at the technology underlying these cryptocurrencies as a
potential generic new way to transfer ownership of value in the longer term.

10
TEN IMPORTANT AND FAMOUS CRYPTOCURRENCIES:

1. Bitcoin (BTC) - The original cryptocurrency, invented in 2008 and launched in

January 2009. Operates using a proof-of-work mechanism, meaning that
computing power is used to verify transactions and generate new blocks in its
blockchain. It has a total maximum supply of 21 million bitcoins, making it
potentially deflationary.

2. Ethereum (ETH) – a proof-of-work cryptocurrency launched in July 2015.

Originally conceived as a ‘universal computer’ that could function as infrastructure
for a decentralized internet, it is capable of running smart contracts, which execute
pre-specificed actions when certain conditions are met. It is currently planning a shift
to a proof-of-stake consensus mechanism, in which transactions are verified by
staking ethereum on them.

3. Tether (USDT) – It is a stablecoin launched in July 2014 as RealCoin. It’s pegged

1:1 to the US dollar and backed up by reserves equivalent to the value of its entire
supply. Running on the Ethereum blockchain (and also running on other chains), it
generally records the highest 24-hour trading volume of any cryptocurrency in the
market. This is because traders tend to exit into Tether during dips, although some
commentators have claimed that it isn’t fully backed, a charge given weight by the
fact that Tether has never undergone a full audit.

4. Binance coin (BNB) – The native cryptocurrency of Binance, the world’s largest
cryptocurrency by trading volume. Launched in June 2017, holding BNB grants users
discounts on the trading fees Binance charges.

5. Cardano (ADA) – A proof-of-stake cryptocurrency launched in 2015 and opened to

trading in 2017. Operating as a general purpose utility blockchain like Ethereum, it
has witnessed steady development in the intervening years, launching the ability to
run smart contracts in September 2021.

11
6. Ripple (XRP) – A cryptocurrency launched in 2012 as OpenCoin. It has generally
positioned itself as a remittance network, providing cross-border transfers between
counterparties and financial institutions. Ripple’s ledger uses neither a proof-of-work
nor a proof-of-stake consensus mechanism, instead using its own consensus algorithm
that’s capable of more than 1,000 transactions per second, in contrast to around 7 per
second for Bitcoin.

7. Dogecoin (DOGE) – A so-called meme coin launched in December 2013.

Featuring a Shiba Inu dog as its mascot, Dogecoin is a fork of Litecoin, which is a
fork of Bitcoin. Despite originating as a joke, it commands a large number of loyal
fans and supporters, who can often help it rise in price quickly.

8. Solana (SOL) – A relatively new blockchain platform that launched in 2020 and
promised scalability far beyond Bitcoin or Ethereum. SOL is touted for having a small
ecologically footprint, fast speeds and extremely low fees. The aforementioned low
fees and fast throughput made it a favorite for NFTs, DEX’s and apps. A common
criticism of Solana is that it’s heavily influenced by VC funding not as decentralized
as its competitors. It’s also experienced several notable outages.

9. Monero (XMR) – A privacy coin launched in 2014. It helps users to achieve greater
anonymity than that offered by Bitcoin and other cryptocurrencies, through a variety
of novel features. These include one-time stealth addresses, ring signatures that mix
transactions so they can’t be traced, and transactions that hide the amounts
transferred. Given its effectiveness, Monero has been delisted by numerous exchanges
that don’t want to break anti-money laundering regulations.

10. The Sandbox (SAND) –The Sandbox is one of the biggest gaming- and
metaverse-related cryptocurrencies in the market. Launched in August 2020, SAND is
the governance and utility token of the Sandbox gaming platform, allowing holders to
buy in-game items, vote on upgrades, and for staking, which earns them rewards.

12
 CHAPTER-2

HISTORY OF CRYPTOCURRENCY

13
The whole cryptocurrency world started when bitcoin was invented in 2008 by an
unknown person or group of people using the name Satoshi Nakamoto. The
currency began use in 2009 when its implementation was released as open-source
software. Bitcoin was created as a way for people to engage in financial transactions
without exclusively relying on banks or governments. Along with being the first
cryptocurrency invented, bitcoin ushered in a new age of blockchain technology and
decentralized digital currencies.

BRIEF HISTORY:

The idea for cryptocurrency first emerged in 1983, when American cryptographer
David Chaum published a conference paper outlining an early form of anonymous
cryptographic electronic money. The concept was for a currency that could be sent
untraceably and in a manner that did not require centralized entities.
On October 31, 2008, Satoshi Nakamoto published the Bitcoin white paper,
describing the functionality of the Bitcoin blockchain network. Satoshi formally
began work on the bitcoin project on August 18th, 2008, when they purchased
Bitcoin.org.

The beginning: The history of Bitcoin was underway. Satoshi Nakamoto mined the
first block of the Bitcoin network on January 3, 2009. This first block which resulted
in 50 bitcoins being mined is now referred to as the Genesis Block. Bitcoin had
virtually no value at this time, as well as for the first few months of its existence. Six
months after bitcoin became tradeable, in April 2010, the value of one BTC was just
under 14 cents. By early November, the price ‘surged’ to 36 cents before settling at
around 29 cents.
While it wasn’t yet worth much, Bitcoin was showing it had real world value. In
February 2011 it rose to $1.06 before coming back down to roughly 87 cents. In the
spring, in part due to an article on the new “crypto currency,” the price took off. From
early April to the end of May, the value of bitcoin rose from 86 cents to $8.89.
Bitcoin prices rose steadily year over year, going from $434 in January 2016, to $998
in January 2017. In July 2017, a software upgrade to Bitcoin was approved, with the
aim being to support development of the Lightning Network (a layer-two scaling
solution) as well as improve security.

A week after the upgrade was activated in August, Bitcoin was trading at around
$2,700. By December 17, 2017, Bitcoin reached an astronomical all-time high of just
under $20,000.
The whole world was shocked to see this sudden increase in prices, that is when the
whole wave of increasing interest of youth in cryptocurrency started.

14
People started seeing it as a tradable asset and through which they can earn money.
Many people started trading in bitcoin and were totally dependent on it for their
livelihood.

During this same time, a new blockchain project called Ethereum was making noise in
the cryptocurrency sphere, having quickly become the number two cryptocurrency by
market cap since launching in July 2015. It brought smart contracts to cryptocurrency,
opening a wide array of potential use cases and generating over 200,000 different
projects (and counting). In contrast to Bitcoin, Ethereum enables additional platforms
to launch and operate on its own chain, each with their own cryptocurrencies and their
own use cases.

15
 CHAPTER-3

COMPONENTS OF CRYPTO WORLD

16
A cryptocurrency, crypto-currency, or crypto is a digital currency designed to work as
a medium of exchange through a computer network that is not reliant on any central
authority, such as a government or bank, to uphold or maintain it.
Individual coin ownership records are stored in a digital ledger, which is a
computerized database using strong cryptography to secure transaction records, to
control the creation of additional coins, and to verify the transfer of coin ownership.
Despite their name, cryptocurrencies are not considered to be currencies in the
traditional sense and while varying treatments have been applied to them, including
classification as commodities, securities, as well as currencies, cryptocurrencies are
generally viewed as a distinct asset class in practice.

ALT COINS: All the cryptocurrencies which are not bitcoin are collectively known
as alternative coins or alt coins. They have distinct features as compared to bitcoin.
Ethereum (ETH) is the largest alt coin in the world.

ARCHITECHTURE: Decentralized cryptocurrency is produced by an entire

cryptocurrency system collectively, at a rate which is defined when the system is created
and which is publicly stated. In centralized banking and economic systems such as the
US Federal Reserve System, corporate boards or governments control the supply of
currency.In the case of decentralized cryptocurrency, companies or governments cannot
produce new units, and have not so far provided backing for other firms, banks or corporate
entities which hold asset value measured in it. The underlying technical system upon which
decentralized cryptocurrencies are based was created by the group or individual known
as Satoshi Nakamoto.
As of May 2018, over 1,800 cryptocurrency specifications existed.Within a proof-of-
work cryptocurrency system such as Bitcoin, the safety, integrity and balance
of ledgers is maintained by a community of mutually distrustful parties referred to
as miners. Miners use their computers to help validate and timestamp transactions,
adding them to the ledger in accordance with a particular timestamping scheme. In
a proof-of-stake blockchain, transactions are validated by holders of the associated
cryptocurrency, sometimes grouped together in stake pools.

17
Most cryptocurrencies are designed to gradually decrease the production of that
currency, placing a cap on the total amount of that currency that will ever be in
circulation. Compared with ordinary currencies held by financial institutions or kept
as cash on hand, cryptocurrencies can be more difficult for seizure by law
enforcement.

BLOCKCHAIN: A blockchain validates each cryptocurrency’s coins. It is a

continuous growing list of records called blocks. These blocks are linked and secured
using cryptography. Each block of this blockchain contains a hash which is a link to
the previous block. These blocks cannot be modified because if a person wants to
modify a single block, he or she has to modify all of the blocks on the block chain that
ever existed.
This makes blockchain completely safe and it cannot be hacked by anyone. This also
helps people to transfer money or assets with full privacy and security, in a
decentralised manner.
Decentralised consensus has thus been achieved by blockchain.

NODE: The world of cryptocurrency, a node is a computer that connects to a

cryptocurrency network. The node supports the cryptocurrency's network through
either; relaying transactions, validation or hosting a copy of the blockchain. In terms
of relaying transactions each network computer has a copy of the blockchain of the
cryptocurrency it supports. When a transaction is made the node creating the
transaction broadcasts details of the transaction using encryption to other nodes
throughout the node network so that the transaction is known. Node owners are either
volunteers, those hosted by the organization or body responsible for developing the
cryptocurrency blockchain network technology, or those who are enticed to host a
node to receive rewards from hosting the node network.

18
NFT: A non-fungible token is a financial security consisting of digital data stored in a
blockchain, a form of distributed ledger. The ownership of an NFT is recorded in the
blockchain, and can be transferred by the owner, allowing NFTs to be sold and traded.

NFTs can represent real-world items like artwork and real estate. "Tokenizing" these
real-world tangible assets makes buying, selling, and trading them more efficient
while reducing the probability of fraud. NFTs can also function to represent
individuals' identities, property rights, and more.
At a very high level, most NFTs are part of the Ethereum blockchain, though other
blockchains have implemented their own version of NFTs. Ethereum is a
cryptocurrency, like bitcoin or dogecoin, but its blockchain also keeps track of who’s
holding and trading NFTs.

METAVERSE: The metaverse is a hypothetical iteration of the Internet as a single,

universal and immersive virtual world that is facilitated by the use of virtual reality
and augmented reality headsets. In colloquial use, a metaverse is a network of 3D
virtual worlds focused on social connection.
The current concept of the metaverse focuses on allowing people to do anything they
can do in real life. Going to a work meeting, hanging out with friends, shopping,
concerts, performances, and even sightseeing can technically be done in the
metaverse.
The Metaverse represents a highly interactive three-dimensional virtual world. Like
the real world, users can trade land, buildings, and other digital assets in the
Metaverse and explore the space using their personalized avatars.
Their use of blockchain infrastructure enables them to tap into the wider crypto
economy, making virtual items exchangeable for real economic value beyond the
confines of the metaverse.

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 CHAPTER-4
OBJECTIVES OF CRYTOCURRENCY

20
The objectives of this study are as follows:

• To learn the impact of cryptocurrency on Indian economy

• To study the current status of cryptocurrency in India and the future it holds
• To understand the significance of cryptocurrencies according to the perception of
investors.
• To analyse the perception of investors towards cryptocurrencies.
• To study the factors considered by the investors & those which ultimately influence
him while investing.

21
 CHAPTER-5
LITERATURE REVIEW

22
Benjamin W. (2014). Cryptocurrency is a developing nation, and among them the
fastest growing is Bitcoins. Never in the growth of the world. Many features are seen
to be associated with the Bitcoins device, certainly one of them is low transaction
costs and peers to look for technologies that guarantee one's privacy. As a result — it
is a database that has established and ensured privacy attracting people as a new
electronic brand. Many different types of people are accepting Bitcoins that include
many retailers, and on-line stores are gaining worldwide acceptance.
• Sushilkumar (2014). The author compares virtual currency exposure with fiat forex,
e.g., paper currency and cryptocurrencies associated with Cryptocurrensets. At
present, Cryptocurrencies are at a single stage of development, yet they maintain a
bright future despite lack of a criminal tender.
• Anooja (2014). This article informs you about money laundering and how we help
other illegal commerce like drugs, human trafficking, smuggling and terrorism. India
has taken steps to protect the takeover of the currency through the law of excessive
spending and has introduced KYC for banks and investment guidelines provided for
its use. The RBI has been taking steps against banks that have failed to implement
KYC procedures, and this has been a deterrent.
• Vasudha (2014). This paper is about E-Commerce and its various types including
Business to Business (B2B), Business to Customer (B2C), Customer to Business
(C2B) and Customer to Customer (C2C) and payment methods, in this case, payments
made by Bitcoins assisted trading business. that Bitcoins represent a non-public and
safe exchange of price ranges. The developer mentioned how Bitcoins helped E-
Commerce grow.
• R Subramanian (2015). It makes a specialty of Cryptocurrencies records and how
they appear and Bitcoins, a form of Cryptocurrency has grown from strength to
strength. It describes how the transaction takes place in this calculation and how safe
or risky the transfer is and the view of future challenges.
18

• S Sundarakani (2015). Currency is used in many industries to cover black money

and to convert equity into white money with the onset of similarity within the
machine using multiple layers. One of the ways in which black money or illicit money
is transformed into a list of legitimate or smooth real estate industry. The provision of
illegal laundry is comparable.
• Yash Yadav (2015). This paper discusses how online growth has opened up a new
market where one can buy and promote by having a store and without the local
barrier. The net has made the stadium another destination, and the concept of virtual
reality has taken a seat once again. This is called E Commerce, and the robustness of
E-commerce depends on the power culture system. Bitcoins are designed for secure
and secure online currency exchange and consequently facilitated E-Commerce
expansion. Bitcoins are seen as a bad opportunity to pay off credit card debt as they
have a reduced exchange rate and help the unpaid.

23
• Ragini Nair (2015) . The paper is on the extent to which a financial institution
invests in infrastructure to grow. As such, they should also spend money on
infrastructure to look at clocks in savings operations through the use of multiple clock
rules. The author determines that foreseeable forecasts should be made an integral
part of financial planning to convey the constraints created by the financial downturn.
• Vikash Gupta (2015). The author draws a distinction between fiat forex and Digital
forex and brings in synergy with Cryptocurrencies' ability to weigh more than
finances. However, according to the author Cryptocurrencies are widely used to play
with various other activities as it is considered anonymous currency and for this
reason protects the identity of badges.
Aditya Prabhu (2016). The paper is set up for Cryptocurrencies and the peer-to-peer
approach to the transaction will remove financial institutions. Transactions are
encrypted using hash security values. The direct users of those wallets are first-party
buyers, and the disadvantages of first-party investors are overcome by the help of
using external servers that maintain statistical reliability. The efficiency of the channel
has been a significant success.
19

• Robert (2012). The observers have analyzed the risk posed by cryptocurrencies
and how they assist in the assessment of the currency. Although Cryptocurrensets are
used to generate cash, they cannot be used for large sums of money. In addition it
checks whether the similarity is covered under the money laundering act.
• Vandana Kumar (2012). The author has gotten into the idea of extorting money due
to the illegal conversion of money into certain methods and ways of spending money.
Revenue from illegal and illegal sources affects the country's economy within the
long term, and as a result there is a need to reduce the same. Since the illegal
exchange is international, the assistance of other international destinations should, and
consequently, all countries must come together to mitigate this threat.
• Diana (2015). The present day paper designer is trying to find a link between money
laundering and the use of Cryptocurrency that aids terrorism and other illegal games.
Cryptocurrensets are a new form of payment, however anonymity is the main function
of Cryptocurrency, far from the worst of globalization to fight against the possibility
of money laundering and terrorism financing.
• M Gupta (2016). Black money is a major problem in India and abroad. It starts with
the generation of that money and is then transferred and deposited at various tax
havens and offshore financial institutions where the money can be imported from the
official channels back to you. S. A. as a valid amount. Current surveys show that
there are various criminal and illegal activities that lead to the generation of black
money. Look at this conclusion that some dummy groups are used most effectively
in the black money era. This is achieved through the interaction of many
entrepreneurs and politicians alike. Both businessmen and politicians are interested
in converting their ill-gotten black money into white money. Most of the dummy

24
groups may have no dealings, and the business is most efficient with the filing of
documents to turn black money into legal money. Most of those dummy companies
do not make any returns and do not pay taxes. They have played a major role in
making illegal games such as fines and fines or faux fines. Some companies use the
techniques of floating, tax evasion, banking fraud and then prioritizing fraud or
bankruptcy and deceiving various markets by combining inventory markets or
commodity markets with the help of a network or circular purchase. The expansion of
the black financial system is huge and fast growing 12 months to 12 months.
Estimates show that it is as big as the global economy system and create the same
economy that deals with legitimate and tax-efficient economies in government. This
trend has been observed in India and various other developing countries alike.
• E Engle (2016). Bitcoins and other Cryptocurrencies are cryptographic currencies,
and the most popular crypto cryptocurrency is Bitcoins. The most important reason
for the initial increase and demand for Bitcoins is the tendency of anonymity and the
fact that it was present in all the areas of the world connected to the Internet.
Cryptocurrencies are mines, i.e., they are generated and their transactions are
validated by a system that uses an extreme algorithm. In addition, transactions made
through Cryptocurrencies are not distributed to any banks or credit card organizations
that can monitor and manage music through the recipient and the foreign currency
sender. Cryptocurrencies operate on a peer-to-peer basis, i.e., only the recipient and
sender of the same information and may or may not recognize the correct personal
identifier. Mining is done with the help of volunteers who depend on the level of
Cryptography that has gone completely to ensure the accuracy and credibility of the
transaction and are rewarded with new forex technology. In fact, Bitcoins are not
something that is a series of signatures, which are stored on top of one another and
stored on the site, which is seen as a sequence of signatures called blockchain.

25
 CHAPTER-6
SWOT ANALYSIS

26
Bitcoin strengths: cryptocurrency can’t be tracked or stolen:
Bitcoin uses blockchain (a peer-to-peer) network between the sender and the
receiver. Only these two parties are involved. It’s unlike any other method of
transferring currency — which involves a third party, like a bank. A middleman is
prohibited from Bitcoin transactions.
And since that pesky third party doesn’t exist, it makes Bitcoin a tax-free currency.
The government doesn’t control or regulate Bitcoin.
For most Bitcoin users, this is an insane positive because it’s not folly to economic
turmoil. Bitcoin’s worth is agreed upon by the sender and the receiver. Not an
institution. Even if the economy crashes, Bitcoin can survive. Surprisingly, this isn’t
why Bitcoin’s popularity skyrocketed within the last few years.

The real strength is the secrecy:

Every person in the Blockchain network has a private wallet address. Trading Bitcoin
is fully anonymous. It’s 100 percent untraceable. Unless you decide to make your
wallet address — but the majority of users don’t. Because the anonymity makes your
financial data fully hidden.
A unique PIN number assigned to each Bitcoin masks the identity of the seller. Once
the Bitcoin is sold, the PIN changes anew. At this point, only the buyer knows the
PIN. It’s irreversible, unless the current owner decides to change the ownership back.
Although this means nothing can be done once the Bitcoin is sent, it also means you
can’t steal this currency. You can steal your physical wallet. You can steal credit card
info and hijack your online bank account. But you can’t steal Bitcoin. It’s because of
this increased security that pushes people towards cryptocurrency.

Bitcoin weaknesses: crippling slow transactions and accessibility loss:

Bitcoin transactions aren’t as fast as they were a few years ago. This is one of the
downsides of Blockchain: the more people use it, the more Blockchain limits your
transactions speeds. Basically, the blocks get bigger the more it’s in use. Making the
whole process clunky and slow. Until this problem is resolved, it’s unlikely Bitcoin
currency will usurp conventional credit card usage.
The system isn’t the only issue. Don’t forget about the Bitcoin wallet password
problem. Since the transactions are encrypted, recovering a lost password isn’t
possible. You’d be surprised how often people forget their password and lose access
to their Bitcoins. In fact, one man bought a few Bitcoin years ago when it was dirt
cheap. Now it’d be worth millions… if only he could find his password to his wallet.
And what about the survivability of Bitcoin? The value of Bitcoin has shifted
relentlessly over the years. And despite the rocky nature, the media pushes out stories
claiming Bitcoin is the future of money. It’s just like stocks, however; unpredictable
and unreliable. Tomorrow, the value could skyrocket. The day after, it may plummet.
The reliability of this currency is too questionable to replace traditional money.

Bitcoin opportunities: Safety from compromising data breaches:As a

society, we’re moving away from physical money in favor of cashless currencies. In
fact, big names like Amazon are already accepting Bitcoin as payment for their goods.
If companies the size of Amazon are recognizing Bitcoins’ viability, it’s safe to
assume others will follow.

27
And what about the growing hostility between the public and the banking institutions?
People are looking for safe, secure, and practical means to avoid using banks. Data
breaches, involving customer data, is consistently occurring with brands like
Facebook and Wells Fargo. How long until the breaches steal credit card info?

No one wants to find out. And others are moving towards Bitcoin. Even with the
hang-ups, it’s safe. Anonymous. And doesn’t involve third parties. And the
opportunities don’t stop there. The blockchain is a phenomenal technology with much
promise. The blocks may be able to keep data like criminal records, birth certificates,
and public records private. It may pave the way for impenetrable encryption. That’s
something the masses are leaning towards for data protection.

Bitcoin threats: the anonymity against governments and banks:

Anonymity is a benefit. An opportunity. But it’s also a problem. In the wrong hands,
anonymous buying is dangerous. Knowing the transaction is untraceable will attract
the attention of criminals. Because let’s be honest: the more people accept Bitcoin, the
more it’ll likely be used for more nefarious reasons.
It’ll also be a problem for the government or law enforcement, after all. If more
criminals adopt Bitcoin into their illegal purchases, law enforcement will face a
challenge in finding and prosecuting these criminals.
As such, we may see more policies and laws regarding cryptocurrency. Although it
may be difficult to enforce thanks to the anonymity, the government will still try.
People fear the consequences of these bills. New tech policies miss the mark. Not
enough government officials understand the implications of using Blockchain and
cryptocurrency. Instead of learning, they’re more likely to slap on a bill and hope for
the best.
Bitcoin isn’t the only cryptocurrency on the market. After its rise in popularity,
alternatives like Ethereum and Peercoin hit the markets. If the value of these
alternative skyrockets, Bitcoin may be in trouble. To be honest, the overall value of
cryptocurrency and lack of reliability is a threat to Bitcoin and its competitors. And
just because cryptocurrency appears infallible now, doesn’t mean it will in the future.
As more information about it surfaces, the holes will reveal themselves. People, such
as criminals, will take advantage of the issues ASAP.

28
BENIFITS OF CRYPTOCURRENCY-

Job opportunities – With many startups re-entering the market, competition for top
talent in the area of blockchain technology and cryptocurrencies may increase. From
blockchain developers to programmers, production engineers and project managers,
there will be many suitors for top talent in the field of blockchain. Industry
consultants, advertisers, content developers and group administrators among others
will now have a major role to play in the national embrace of cryptocurrencies that
will now be sought by many startups. The RBI will now be encouraged to help
control the world of opportunities that cryptocurrencies generate. The stance made
clear by the Supreme Court should that the RBI rethink its restrictive approach to
cryptography and then come up with more balanced and well-thought-out rules to
protect the public interest and that of other ecosystem stakeholders. The RBI can take
a leaf out of its global peers, as many central banks have launched their
cryptocurrencies in other countries. Nonetheless, the expectation here is that the latest
measures will press for more acceptance and tighter enforcement.

Immunity from theft – At present, the financial system, and the resultant economy,
is not immune to robberies or fraud. As we know the planet is becoming more
vulnerable to complex leaks and hacks. With several ransomware attacks, data leaks
from top-notch banks and credit card companies, news headlines have been abuzz in
the last few years. India was going digital at the time, the base of which was built on
Aadhaar authentication, Jan Dhan accounts etc. However, the same does give rise to
flaws in technology, with criminals planning to break the authentication mechanism
of Aadhaar or Jan-Dhan accounts. In making cryptocurrencies all verified transactions
must be deposited in a public ledger. To ensure the legitimacy of record keeping, all
identities of the coin owners are encrypted. You own it because the currency is
decentralized. It has no power over either the government or bank.

Accessibility – Blockchain is the reason why crypto-currency is worth something.

Ease of use is the reason why there is a high demand for crypto-currency. All you
need is a mobile screen, an internet connection, and you easily make payments and
money transfers to your accounts. There are more than two billion people with access
to the Internet who cannot use conventional forms of trade. These people are clued-in
to the crypto-currency market.

Global economies – Crypto-currency presents Indians with a golden opportunity to

be on par with the global economy, particularly the present burgeoning millennial
generation. A cryptocurrencies-led economy is a decentralised economy. There is
plenty of time and money to secure third-party approvals, and all the time and energy
spent in negotiations will no longer be needed when buying, for example, a house etc.
Considering some of the trailblazing and epoch-making trends of the past, including
the emergence of the internet, the technological economy, the creation of Silicon
Valley etc., India has just sought to balance the pace of global innovations.

29
 CRITICISM OF CRYPTOCURRENCY
The semi-anonymous aspect of cryptocurrency transfers makes them ideal for a
variety of illegal practices, such as money laundering and tax evasion. Crypto-
currency supporters, though, also strongly respect their anonymity, citing privacy
advantages such as protection for whistleblowers or dissidents living under oppressive
regimes. Some cryptocurrencies are more intimate.
The cryptocurrency form is not exempt from any financial and security issues. I
reviewed many studies and cryptocurrency networks and even explored several
markets for selling cryptocurrency to investigate the difficulties and problems that
occur in this interactive phenomena.

Money laundering – Money laundering is one danger that is highly likely to

increase with the usage of VC especially with platforms that allow users to exchange
virtual currency with real money. In realistic situations, the police detained a group of
14 people in Korea in 2008 for stealing $38 million from virtual currency
transactions. The group translated the $38 million that gold farming produces from
Korea into a paper firm in China as purchasing payments.

Black market – Perhaps one of the biggest drawbacks and security issues affecting
blockchain is its potential to promote criminal activity. There are several anonymous
trades on the grey and black markets denominated in Bitcoin and other
cryptocurrencies. For example, Bitcoin was used by the notorious “dark web”
platform Silk Road, promoting illegal drug sales and other criminal acts before being
shut down in 2014. Cryptocurrencies are now highly common money-laundering
devices. They unlawfully acquired money by funnelling through a “safe” conduit that
conceals the origins. For examples, when a gamer wants to leave a game, he/she may
want to sell the virtual currency that he/she owns by selling it in the game forums.
The way payments are collected is dangerous because many fraudulent users can not
complete the payment, or challenge after payment. They will then get their money
back plus the virtual currency.

Tax evasion – Since national governments do not oversee cryptocurrencies,

cryptocurrencies typically remain outside of their direct jurisdiction, attracting tax
evaders naturally. In Bitcoin and other coins, several small companies pay workers.
They do so to reduce payroll tax responsibility and to help avoid income tax
obligation for their workers. Even they embrace tokens from online traders to attempt
to escape selling and income tax responsibility.

No refunds – The notion of such an arbitrator violates the decentralizing spirit at the
heart of the new theory of cryptocurrencies. What this means is that if you’re robbed
in a crypto-currency deal you don’t have someone to turn to. Although cryptocurrency
miners play a role in cryptocurrency transactions as quasi-intermediaries, they are not
responsible for arbitrating conflicts between the transacting parties. An example is to
pay upfront for an item that you never get. Large payment providers such as
MasterCard, Visa and PayPal also move in to help solve conflicts between buyers and
sellers. Their method of paying for, or refunding, is intended to avoid vendor fraud.

30
Although some newer cryptocurrencies seek to resolve the surrounding chargebacks
or refunds problem, the solutions remain incomplete and still unproven.

Data loss – Considering a virtually uncrackable source code, impenetrable

authentication protocols (keys) and sufficient security protections (which Mt. Gox
lacked), keeping money in the cloud or a physical data storage unit is better than in a
backpack or back pocket. Also, those who store their data in a single cloud provider
will risk failure if the server is physically compromised or removed from the internet.
The early advocates of crypto-currency believed that, if properly protected, digital
alternate currencies agreed to help 24 a definitive step away from traditional cash,
which they find to be unreliable and potentially dangerous. All this means
cryptocurrency consumers are taking reasonable and appropriate measures to avoid
data loss. For example, if their computer is lost or robbed, the consumers who store
their private keys on single physical storage devices will incur a permanent financial
loss.

High price and not exchangeable – The most popular cryptocurrencies, those with
the highest dollar market capitalisation, have dedicated online exchanges allowing
direct exchange for fiat currency. The remaining cryptocurrencies have no dedicated
online exchanges. Many cryptocurrencies have few extraordinary units and are
concentrated in the hands of a handful of individuals (often currency developers and
close associates). For fiat currencies, they are therefore not explicitly exchangeable.
Instead, before the fiat currency conversion, consumers could turn them into more
widely used cryptocurrencies, including Bitcoin. These holders manage currency
stocks efficiently, making them vulnerable to fluctuations in wild valuation and
simple manipulation. This suppresses competition for some less-used
cryptocurrencies, and thus the valuation of others.

31
 CHAPTER-7
CRYPTOCURRENCY IN INDIA

32
 INTRODUCTION
Crypto currencies could provide a significant benefit by overcoming the lack of social
trust and by increasing the access to financial services (Nakamoto, 2008) as they can
be considered as a medium to support the growth process in developing countries by
increasing financial inclusion, providing a better traceability of funds and to help
people to escape poverty (Ammous, 2015).
To provide a comprehensive overview of the opportunities of crypto currencies in
developing countries, it is necessary to understand the general advantages and
disadvantages crypto currencies provide for users compared to central bank-issued fiat
currencies, like the Euro or the US dollar, and to discuss how they emerge from the
underlying technology. For this purpose, the example of two crypto currencies is used
in this paper. The underlying technology of most crypto currencies is blockchain
technology. A blockchain is a decentralized database that is distributed in the network
on a variety of computers. It is characterized by the fact that its entries are
summarized and stored in blocks.

TIMELINE OF RBI AND CRYPTOCURRENCY

• In the last few years, India with a population that is over 1 billion strong has been
experiencing something of an economic renaissance. This was the degree to which the
world developed that the International Monetary Fund called it the fastest-growing
developing economy. Over 40 per cent of the country’s population has access to
telecommunications and Internet services. A country steeped in mystery, history and
culture, when it comes to technological advancement, it’s not one to fall behind either.
Bitcoin and other cryptocurrencies traded throughout the nation for many years now.

• The cryptocurrencies story began in 2008 when a paper titled “Bitcoin: A Peer to
Peer Electronic Cash System” was published by the name of Satoshi Nakamoto by a
single or group of pseudonymous developers. The real network only took some time
to launch with the first transfers that took place in January 2009. A year later the first
actual sale of an item using Bitcoin occurred with a user swapping 10,000 Bitcoin for
two pizzas in 2010, which for the first time attached a cash value to the
cryptocurrency.

• By 2011, other cryptocurrencies started to emerge, all making their debut with
Litecoin, Namecoin and Swiftcoin. Meanwhile, the cryptocurrency Bitcoin that
started it all began to be criticized when reports arose that it was being used on the so-
called “dark web,” particularly on sites like Silk Road as a way of paying for
felonious transactions. Over the next five years, cryptocurrencies slowly gained
momentum with an increased number of transactions and Bitcoin’s valuation, the
most common cryptocurrency soared from around $5 in early 2012 to about $1000 by
the end of 2017.

• Riding on the back of this popularity surge, multiple cryptocurrency exchanges

started operating in India between 2012 and 2017, offering much-needed depth and
liquidity to the cryptocurrency sector in India. Those included common exchange
platforms like Zebpay, Coinsecure, Unocoin, Koinex, Bitxoxo and Pocket Bits.

• India’s RBI released a press release warning the public against virtual currency
mining, like Bitcoin mining back in 2013. With the price of shooting up

33
cryptocurrency and their increasing acceptance and usage by people outside the
conventional cults, authorities around the world started to consider 27 this emerging
development. RBI’s First Press Release warning consumers about Virtual Currency
Risks were:
• No central bank funds Digital currencies.
• Value is a question of speculation, not of an asset or a good.
• RBI has not permitted trading or the use of virtual currencies.
• RBI is in the process of reviewing the proposed regulatory structure for
cryptocurrencies in India and will give further directions based on their review.
• Prime Minister Narendra Modi announced a demonetization program initiated on
November 8, 2016. The government’s decision to demonetize about 86 per cent of the
country’s paper currency sent shockwaves across India’s subcontinent. People with
substantial cash reserves wanted a new way to keep their capital without significant
tax pressures and sundry policy oversight. Buying massive orders of Bitcoin or other
cryptocurrencies became standard practice for others and then trading them at a later
date. This meant that they circumvented what should have been large taxation had
they wanted to transfer their money into the financial sector.
• Transaction volumes and acceptance of cryptocurrencies in India picked up in
earnest just after the demonetisation of high-value currency notes in November 2016,
with the government focus on digital payments contributing to alternatives to
mainstream online banking such as cryptocurrencies pushing their way into public
consciousness. Indian cryptocurrency exchanges began to accumulate customers at a
much higher rate than pushed up demand on all Indian exchanges for cryptocurrency
transactions.
• The 2016 demonetization policy may have sparked the adoption of cryptocurrencies
among a large portion of the population but soon realities started to surface that stifled
the country’s market development. Despite its large population, India contributes just
2 per cent of the overall global blockchain industry capitalising. The small role that
such a large economy plays can be attributed to high cryptocurrency prices &
government crackdown led by the RBI.
• In November 2017, under the chairmanship of Shri Subhash Chandra Garg,
Director, Department of Economic Affairs, Ministry of Finance and composed of Shri
Ajay Prakash Sawhney (Director, Ministry of Electronics and Information
Technology), Shri Ajay Tyagi (Chairman, Securities and Exchange Board of India)
and Shri B.P, the Government of India formed a high-level InterMinisterial
Committee. The Committee’s task was to research different problems relating to
virtual currencies and to recommend concrete steps that could be taken in conjunction
with them. In July 2019, this Committee submitted its opinion proposing a ban on
private cryptography.
• Both the RBI and the Ministry of Finance released press releases in December 2017
advising the general public about the hazards and threats associated with
cryptocurrencies, with the Ministry of Finance Press Release noting that
cryptocurrencies are like Ponzi schemes, and also announcing that they are not
currencies or coins. It should be noted here that until the end of March 2018, the RBI
and the Ministry of Finance had released numerous press releases on cryptocurrencies
warning people against their threats but none of them either took legal action or gave
enforceable guidance against cryptocurrencies.
• On 1 February 2018: In the Union Budget Statement, Finance Minister Arun Jaitley
said that cryptocurrencies are not a legal tender and cannot be used as part of the

34
payment systems. If anyone does, the government will come down harshly and
cryptocurrency won’t be permitted because they can be used for illegal operation.
• The RBI directed banks to stop servicing cryptocurrency exchanges before there
was a clear policy in effect. The circular dated 6 April 2018, in which the RBI
prohibited commercial and cooperative banks, payment institutions, small financial
institutions, NBFCs and payment system providers from not only trading with virtual
currencies themselves but also ordering them to avoid offering services to all
organizations dealing with virtual currencies. With immediate effect, all licensed
agencies have been barred from managing or delivering services to any person or
company dealing with or settling virtual currencies. 28
• The circular result was that cryptocurrency exchanges, which relied on conventional
banking networks to send and receive money to and from their customers, we’re
unable to access any financial services in India. It effectively crippled their business
activities as turning cash into cryptocurrency was an integral part of their activities
and vice versa. And pure cryptocurrency exchanges that did not trade with fiat
currency were unable to carry out their daily activities without access to banking
facilities, such as paying for office rooms, workers wages, storage space, distributor
payments, etc.
• RBI said the move was appropriate at the time to curb “ring-fencing” of the
financial system in the region. It has also claimed that it is not appropriate to view
Bitcoin and other cryptocurrencies as currency because they are not made of metal or
reside in intangible shape, nor were they stamped by the government. The central
bank ‘s 2018 notice sent fear to many local startups and firms providing
cryptocurrency trading services.
• The Indian government has been debating “Banning the Cryptocurrency and
Controlling the Official Digital Currency Bill 2019.” The bill was introduced by the
Interministerial Committee (IMC), to research all facets of cryptocurrencies and make
country recommendations. Former finance secretary Subhash Chandra Garg headed
the committee. The Indian crypto group claims the bill is flawed and has been
lobbying for the IMC guidelines to be re-evaluated by the Government. Since then,
Garg has left his government job.
• In the face of the double impact of decreased trading rates and lack of access
banking facilities, the crypto-currency exchanges themselves find it difficult to
maintain operations. In the face of such an existential danger, members of the Internet
and Mobile Association of India (IMAI) submitted a written petition to the Supreme
Court on 15 May 2018 entitled The Internet and Mobile Association of India v.
Reserve Bank of India.
• On 4 March 2020, the Supreme Court lifted the ban imposed on 6 April 2018 by the
RBI in the case entitled “Internet and Mobile Association of India (IAMAI) Vs
Reserve Bank of India which prohibited its regulated entities, such as banks, from
trading in or facilitating banking transactions in virtual currency (VC). Subsequently,
the RBI published IAMAI ‘s circular request, shareholders/founders of crypto-asset
trading platforms, and real crypto-asset traders who were the petitioners submitted
before the SC. A three-judge Bench of the Supreme Court of India drafted a Reserve
Bank of India curricular,2018 which sought to prohibit banks and institutions from
trading in ‘virtual currencies’ — often referred to as cryptocurrencies, such as Bitcoin
— and to provide services to those engaged in trading in such currencies. The court
order comes seven months after an inter-ministerial committee has proposed banning
cryptocurrencies, recommending instead to introduce an official digital currency in
the region.

35
 • On many counts, they contested the RBI circular. Through that circular, the RBI
had prohibited banks from extending a range of services to facilitate the handling of
cryptocurrencies by individuals and entities. The list of such services included
‘keeping accounts, registering, trading, settling, clearing, lending against virtual
tokens, accepting them as collateral, opening exchange accounts and
transferring/receiving money in accounts related to the purchase/sale of VCs.
• Justices Rohinton Nariman, Aniruddha Bose and V. Ramasubramanian set aside the
2018 RBI circular, saying, “The impugned rule can not be considered to be
proportionate.” Their rationale was based on the fact that the RBI did not notice that
virtual currency trading practices did adversely affect the institutions it controlled.
This was not banned in the region, even as virtual currencies were not. “But the trade-
in VCs and the working of VC exchanges are sent by the impugned circular to
comatose by disconnecting their lifeline namely, the link with the normal banking
system,” the order said.

36
 LAWS RELATED TO CRYPTOCURRENCY

Guidance should be taken from other jurisdictions that have already had extensive
discussions and workshops on this subject while evaluating the legal approach on
cryptocurrency. The U.S. The Uniform Law Commission has drafted legislation on
the issue, the ‘Uniform Regulation of Virtual Currency Businesses Act’ (‘ULC Model
Law’), after reviewing the opinions of policymakers, members of the public, non-
profit groups and leading leaders of the industry. Crypto-assets are a common
phenomenon rather than a regional authority, thus, making global precedents easy to
apply to the Indian context.

The Prevention of Money Laundering Act (PMLA) is the definitive Indian law on
KYC/AML(Know your Customer/ Application lifecycle management). Crypto-asset
undertakings may be brought under the PMLA as any entity that is a ‘bank company,
financial institution, intermediary or a person carrying on a designated business or
profession.’ In any event, the RBI has the power to prescribe enhanced or simplified
measures under the Prevention of Money Laundering (Maintenance of Records) Rules
to verify the identity of the client. Consideration of the type of customer, corporate
arrangement, complexity and importance of the transactions concerning the potential
risk of money laundering and terrorist funding.
The RBI will adopt a risk-based strategy and mitigate money laundering issues while
preventing a full ban on funding these businesses. This will require accountable and
reputable businesses to work in a controlled manner. The RBI Circular might not be
appropriate for that approach. A new regulatory system will require responsibilities
for crypto-asset companies, such as financial adequacy, audits and monitoring. A
proposed licensing system will help to better safeguard customer safety.

Payment and Settlement System Act, 2007 – PSS Act Sections 10, 18, and 38 grant
the RBI the authority to create rules, directives, and guidance. That is, for example,
the control the RBI uses to enforce the Master Directive on Prepaid Payment
Instruments. By this legislation, cryptocurrency trading sites can also be put under a
licensing regime under the PSS Act. The guidelines released by the Department of
Banking Regulation (DBR), RBI, on Know Your Customer (KYC)/Anti-Money
Laundering (AML)/Combating Terrorism Financing (CFT) shall extend mutatis
mutandis to all agencies that issue PPIs and their employees. This solution will
require suitable exemptions in the RBI Circular, as RBI-regulated organizations are
currently totally barred from dealing with, or encouraging, virtual currency trading
under the circular.

Non-Banking Finance Companies (NBFC) – It puts crypto-asset market operation

into a well-established regulatory framework, which requires licenses, financial
adequacy, KYC / AML laws, audits, reports and other consumer-focused criteria. The
business of an NBFC is defined in Section 45-I of the RBI Act. An NBFC is defined
as a variety of categories of ‘financial institutions’ excluding undertakings of mainly
buying or distributing products or delivering services and businesses collecting
deposits as their main business. This provision grants the RBI the authority to
designate any class of entities as NFBCs, with the prior approval of the Central

37
Government. The RBI and the Central Government can, therefore, consider NBFCs to
be notifying entities carrying on ‘crypto-asset business activities’.

Consumer Protection Act, 2019 – Under Section 30A of the Consumer Protection
Act, the National Consumer Disputes Redressal Commission has the authority to
make regulations “to provide for all matters for which coverage is required or
expedient to give effect to the provisions of this Act.” The Consumer Protection Act
2019 protects consumers from ‘unfair trade practices,’ ‘deficiencies’ in facilities and
‘defects’ in goods. The word ‘unfair marketing practices’ requires a false or
misleading advertisement. 30 Hence, the National Commission is open to developing
laws (e.g., establishing a regulatory regime) taking into account the crypto-asset
industry’s specific consumer security issues. We suggest this path should also be
considered. As a result, customers have redress under the Consumer Protection Act,
2019 where every crypto-asset company renders misrepresentations to customers or
offers defective services.

Foreign Exchange Management Act,1999 – FEMA notes that ‘international

currency’ is any currency other than Indian currency. The currency of India is limited
to any currency expressed in Indian rupees. Consequently, if any crypto-asset can be
used to “build a financial risk,” it will amount to “international currency.” The RBI
may control the drawing of these FEMA crypto-assets such that only ‘registered
persons’ can trade in foreign currency. This would have the benefit of having an
increasingly wellestablished regulatory framework for those concerned with these
forms of crypto-assets since they will be subject to all the protections that apply to
approved persons. Since certain crypto-assets are called ‘goods’ under FEMA, the
regulatory consequences under FEMA (e.g., export compliance) will flow
accordingly. However, the RBI did not explain the classification of crypto-assets
under FEMA, which confused the issue. The RBI can determine to amend the rules
and guidelines on the sale and import of products to clarify their operation concerning
crypto-assets.

Information Technology Act, 2000 – Any providers of virtual currencies get

information and details about their customers. Platforms that allow credit card
transactions in virtual currency must also recognize these laws when processing
information about credit cards. These data must be maintained and stored with strict
levels of confidentiality and security. Otherwise, the Virtual Currency provider can
violate data protection and security laws. The Information Technology Act reads with
the Rules on Information Technology, 2011 requires that all those responsible for
using data follow strict rules. Such laws require the fact and intent for which the
information is gathered, the creation and dissemination of privacy policy and the
safeguarding of data. It establishes relatively strict cybersecurity standards for every
organizational entity managing confidential personal data, and the Central
Government that, if it seems appropriate, recommend clear additional steps for
crypto-asset business activities. A new Data Privacy Bill is set to be adopted, and
when enacted, the same safety requirements will also be recommended under this
Law.

Credit Information Companies Regulation Act – There is some suggestion that

due to its tremendous growth, the Credit Information Companies Regulation (CICRA)
Act, which became law in India in 2005, is likely to be extended to cryptocurrencies.

38
Since cryptocurrency networks are ubiquitous for many activities such as processing,
distributing, redeeming, trading, and exchanging cryptocurrency values, the
specifications of the CICRA Act may be implemented. According to this Act, Indian
individuals’ credit details must be obtained in compliance with such legislation as set
out in this Act. In the case of illegal data theft, organizations which collect financial
information may be held liable. Offshore financial transfers are very common in
today’s cyberspace, so taking into account the vast amount of persons involved with
them, these activities are useful for the security of the individual’s concerned personal
data.

Prize chits and Chits Fund Act – Both the Prize Chits Act and the Chit Funds
Act,1982 refer to the idea of ‘monies’/’money’ and ‘cash’ in the terms ‘prize chit,’
‘chit’ and ‘capital exchange scheme’ in their meanings. Since crypto-assets are not
technically ‘money’ under Indian law, these meanings must be revised to include the
word ‘valuable item’ (as used in Section 2(c) of the Prize Chits Act, so that, among
other valuable items, the aims of these Acts can be applied to the crypto-asset
schemes.

Taxation laws – In the virtual currency business taxation legislation ranges from
country to country. Many countries place taxes on income produced by virtual
currency transactions and some others have only proposed taxation legislation. In
India, where RBI notifies any such law, any trade therein would be subject to the
Foreign Exchange Management (FEMA) Act, 1999. Crypto-asset-related transaction
taxes would fall generally into two headings: Goods and Services Tax (GST), and
Income Tax. The Crypto like bitcoins is called a capital asset if bought for profit. Any
income resulting from a bitcoin trade shall be treated as a capital gain.

39
 CHAPTER-8
IMPACT OF CRYPTOCURRENCY
ON ECONOMY

40
 IMPACT ON ECONOMY

The impact is of cryptocurrencies on the Indian economy is clearly depicted as the

prices of cryptocurrency market are now falling down. Indian government has made it
clear with their stand of not providing a legal status for cryptocurrency in India. The
reason for this kind of a decision from government hails from first, the challenge of
monitoring the decentralized transactions in cryptocurrencies are difficult to trace
which could be advantageous for the hackers, criminals and also for terrorist
activities. The second reason being cryptocurrency market could be a leading
competitor for the banking service industry.Cryptocurrency like Bitcoin has become
popular in India like other nations as the volume of Indian rupee being traded in
cryptocurrency have been at the highest post demonetisation. Researches shows that
the volume generated by the rupee dominated cryptocurrency is the third largest
volume traded after American dollar and yen. The demonetization policy of 2016 may
have encouraged the implementation of cryptocurrencies amongst a substantial share
of the population but realities rapidly began to come out that have subdued the growth
of the market in the country. In spite of its enormous population, India only
contributes two percent of the whole global cryptocurrency market capitalization.
Cryptocurrencies in Indian context portrays few Present and future of Cryptocurrency
in India .Presently there is no regulation in India for cryptocurrencies. The absence of
a regulation certain bitcoin exchanges such as Unocoin, Zebpay, etc have initiated
their operation in trading or cryptocurrencies with Know Your Customer (KYC)
norms. The Reserve Bank of India initially was against the trading of cryptocurrencies
in India, however in the year 2014 RBI showed its interest in block chain technology
used by cryptocurrency to reduce the physical paper currency circulation. In 2015, a
financial stability report was published by RBI to identify the importance of private
blockchain. In 2016, ICICI bank with Emirates NBD (in terms of assets, one of the
largest banking groups in the Middle East) has executed transactions and remittance
using block chain technology. Then in 2017, a white paper has been issued by
Institute for Development and Research in Banking Technology (IDRBT) of RBI and
also a pilot test was taken.

The Union finance minister in his Union Budget 2018 speech said, “The government
does not consider cryptocurrencies legal tender or coin and will take all measures to
eliminate use of these crypto-assets in financing illegitimate activities or as part of the
payment system.” However, the government has recognized blockchain and said that
a “distributed ledger system or the blockchain technology allows organization of any
chain of records or transactions, without the need of intermediaries. The government
will explore use of blockchain technology proactively for ushering in digital
economy.”

Though government is taking a cautious approach on cryptocurrencies, it is bullish on

the use of blockchain. Crytocurrency industry believes that blockchain and
crytptocurrencies have to go hand in hand. But unless and until a decentralised system
is formed, it is as good as keeping track. If only block chain technology is to be
accommodated that just builds up a centralised system which gives authority to a
person or a body to rectify and modify it.

41
Experts and observers in the country hope and predict that the government will
regulate cryptocurrencies in India in different stages. This favourable and positive
signs give hopes to the industry of cryptocurrency. Mean while private companies
dealing in cryptocurrencies have set up an association called, the Digital Assets and
Blockchain foundation which has been engaged in educating the public on the
advantageous and investment avenues in cryptocurrency by conducting security
checks, identification documents issued by the government, Permanent Account
Numbers (PAN) orAadhaar IDs.
As the arrival of internet, cryptocurrency also has a tremendous growth potential.
With the help of both these factors of internet and blockchain technology, in future
there are probabilities of virtual banks in India. Hence to prove it on a positive note
the Reserve Bank of India has taken initiatives to launch its own 32 cryptocurrency
named as ‘ Lakshmi’.

India happens to be at a sweet spot of driving growth and innovation by landing a

robust Digital Currency Bill this year. In spite of the several rumors on a potential ban
on crypto in India, there are multiple use cases that could be considered by the
policymakers who understand the true potential of leveraging crypto and its impact on
our economy.

Keeping in mind that our nation’s success in the past three decades has come from
ITeS-based solutions, if India is aiming to reach a $5 trillion economy, we cannot
ignore the $1.7 trlllion market that exists for cryptocurrencies. A forward-looking
crypto policy can have a significant impact on improving our overall financial
infrastructure, help safeguard national security, deter financial frauds, strengthen our
monetary policy, attract international capital, create more job opportunities, and retain
our tech talent to accelerate technological development, thereby driving the nation
towards becoming a global powerhouse.

We will need to prepare for the future and make adequate accommodations to
safeguard our global financial positioning. We also have to become ‘Atmanirbhar’
and reduce our dependency in situations like the 2008 financial crisis or the 2020
COVID-19 crash. Cyberwarfare also poses a sizable threat in our rapidly digitizing
country. A decentralized financial platform could help India resolve such issues and
have an added advantage as these platform networks will not be blocked by any single
state or country in times of national distress or conflict. The other advantage here
would be that if we could create our own social networks on Ethereum, it would help
build a decentralized ecosystem, which has its own positive effects.

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 CHAPTER-9
PERCEPTION OF OLDER GENERATION

43
Buyers in the Gen Z and Millennials buckets make up nearly 94% of all crypto buyers
,compared to just 6.14% across all other buyers over the age of 40.

Looking a little closer, Gen Z buyers outnumber Gen X buyers by 3.5x and Boomer
buyers by 14.3x.

Millennial buyers outnumber Gen X buyers by 15.5x and Boomer buyers by 62.9x.

So not only is crypto a young buyer’s game, it is by a very wide margin. The data
shows that there’s a clear correlation between age and the likelihood to buy
cryptocurrency, the older you are, the less likely you are to make a purchase.

5 percent of millennials (18 to 37) say bitcoin is the best place to put money they
won’t need for 10 years or more. Only 1.2 percent of Gen X-ers (ages 38 to 53) favor
it for long-term saving, and less than 1 percent of boomers (ages 54 to 72) do. The
lure of making a quick buck has always attracted young people to invest in risky
assets. For Generation Z, it is the volatility - and the decentralised nature of digital
assets such as cryptocurrency and NFTs which appeals.

Older generations have started recognizing the potential of cryptocurrencies and

blockchain in global payment systems. They are ready to consider digital assets as an
alternative to traditional money transfer services.

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 CHAPTER-10

IMPACT ON CRYPTOCURRENCY
DURING COVID-19

45
Cryptocurrency history begins in 2008 as a means of payment proposal. However,
cryptocurrencies evolved into a complex ecosystem of high yield speculative assets.
Contrary to traditional financial instruments, they are not traded in organized, law-
abiding venues, but on online platforms.

Cryptocurrencies have become one of the most traded financial assets in the last
decade. In order to put their importance into perspective, two of the most important
stock exchanges in the world, the New York Stock Exchange and Nasdaq, report an
average of $30 billions and $85 billions in daily volume, respectively.

Coronavirus or COVID-19 has created havoc in the history of humankind. It's no less
than a disaster we are going through. Sustaining in this time seems the only way to
survive. While the pandemic caused several commodities and assets to lose their
value, the cryptocurrency market, on the other hand, was found immune to
coronavirus. From approximately $7000 in March 2020 to more than USD 54,000 to
date, Bitcoin has boomed and astonished the whole world. Investors have doubled or
tripled their fortune. Some made millions in a year, and some became Billionaires.

POSITIVE IMPACTS OF COVID 19:

The volatility of the market is inevitable. Still, people were buying cryptocurrency
that has made the crypto market appealing among the crowd.

●The prices had gone down to half in March 2020, alleviating as low as $ 3,780.
Since then, Bitcoin has gained so much wealth and popularity in the pandemic.

● Sentiments have been way too bullish that pumped the Bitcoins and Altcoins,
surpassing several existing records. As of now, the market cap of Bitcoin has a

46
staggering of $1.1 TN, comprising half of the cryptocurrency market, which is over
$2 TN.

●While other commodities were losing worth, cryptocurrencies, on the other hand,
were proving themselves as a reliable asset in these tough times.

●Despite this deadly outbreak, Cryptocurrency exchanges in India kept on expanding

their business and their figures. Also, this led to the opening of new Bitcoin
Exchanges in India as well.

Months back, RBI had banned cryptocurrency since the illegality was the reason. But
soon, the Supreme court of India quashed the ban stating that these aren't regulated
yet but aren't illegal too. Despite the threat revolving over cryptocurrency, the volume
in India itself is 8 million holdings up to 100 billion rupees corresponding to tokens
held by Indian investors.

In the beginning, speculation analysis helped investors to book profits. But as time
passed by, people realised that it's more secure and a safer means of exchange and can
be a reliable asset in worst cases. Cryptocurrency Exchange in India like WazirX,
CoinSwitchKuber started expanding their business and doubled their fortune. Several
Bitcoin Exchanges in India opened up that allowed newbies to invest and trade
Bitcoins.

47
NEGATIVE IMPACT OF COVID 19:

● Indeed the equities have increased since the outbreak. However, some analysts
believe that this sudden spike won't last forever. Bitcoins are way far from a safe
haven like Gold and Silver.

● The crypto is uncertain and unregulated in India yet. That is leading the sentiments
to go on a negative note since the crypto market is experiencing this threat revolving
over its head.

● Bitcoins are still yet to be accepted as a norm in many countries. Yes, it's still
mainstream, but this unexpected outbreak has turned some moods against the Crypto
investment.

The positive side of cryptocurrency is that the market is acting as a safe haven and a
reliable investment.

The market is quite nascent as of now. It's because the value and consideration had
swelled amid the pandemic. But it can lose its worth anytime since the scams and
liquidation issues exist till now.

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 CHAPTER-11
FUTURE SCOPE OF THE STUDY

49
The use of Bitcoin and Ethereum could help strengthen India’s monetary policy and
bridge the gap areas that exist in the current fintech landscape. Crypto’s distributed
ledger technology permits faster, direct transactions by the users and also helps keep
track of every digital transaction, which is far more advanced and effective than
existing protocols such as SWIFT. Secondly, Bitcoin can be used as an asset that
sovereigns use to complement their national digital currencies. It also reduces the
burden on regulators by allowing them to write programs that certify that financial
actors are in complete compliance with the regulators. We can avoid instances such as
mortgage fraud and other fraudulent activities.
In other words, the evolution of Bitcoin and cryptocurrencies holds economic
importance similar to the internet in the 90s. The second unique crypto called
Ethereum, which enabled smart contracts, gave birth to an entire sector called
decentralized finance (DeFi). DeFi is to build a multi-faceted financial system that
boosts the functionality and helps improve the legacy or the traditional financial
system. DeFi alone has created disruptions in the fintech space and, in the future,
DeFi neo banks will play a pivotal role to successfully bridge the gap between fintech
and DeFi to attract new customers. Therefore, Blockchainbased accounting holds the
potential to empower regulators to monitor their activities and conduct risk
management seamlessly.
We are all aware of the devastating impact that COVID-19 has had on the Indian
economy and the global market at large. Despite this, crypto has been generating jobs
across a variety of functions in India and abroad. As of today, over 300 start-ups have
generated tens of thousands of jobs and hundred-millions of dollars in revenue and
taxes. The ongoing development will inevitably lead to tech talent being engaged in
India. Indian youth seeks challenging opportunities to work on projects which are
internationally competitive and also help support improving our tech infrastructure.
In March 2020, two major events occurred which have boosted crypto adoption in
India – i.e. the Supreme Court’s historic verdict and the pandemic. WazirX
completely caters to the Indian market and has seen tremendous growth since then.
Several Indians have lost jobs, and this has led them to invest in cryptocurrency to
earn a side income by becoming traders, technical analysts, or crypto influencers.
Globally, many institutional investors, including hedge funds in the US along with the
giants like Square and PayPal, are entering into crypto and are in a buying mode. This
has also given a push to Bitcoin adoption.

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 CHAPTER-12

RESEARCH METHODOLOGY

51
 TYPE OF RESEARCH USED

Research can be classified in many different ways on the basis of methodology of the
research, the knowledge it creates, the user groups, the research problem it
investigates, etc. Following is the methodology that we have used in research:
Quantitative Research:
In natural and social sciences, and sometimes in other fields, quantitative research is
the systematic empirical investigation of observable phenomena via statistical,
mathematical, or computational techniques. The objective of quantitative research is
to develop and employ mathematical models, theories, and hypotheses pertaining to
phenomena. The process of measurement is central to quantitative research because it
provides the fundamental connection between empirical observation and
mathematical expression of quantitative relationships.
Quantitative research is generally closely affiliated with ideas from 'the scientific
method', which can include:
• The generation of models, theories and hypotheses.
• The development of instruments and methods for measurement.
• Experimental control and manipulation of variables.
• Collection of empirical data.
• Modelling and analysis of data.

TYPE OF DATA USED here, we have used Secondary Data while conducting
research sources through interviews, surveys , experiments, etc.What is Secondary
Data? Secondary data is the data that have been already collected by and readily
available from other sources. Such data are cheaper and more quickly obtainable than
the primary data and also may be available when primary data cannot be obtained at
all. Here, various websites,books and journals are been reffered for secondary data.

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 CHAPTER-13

FINDINGS AND CONCLUSION

53
THE MAIN FINDINGS OF THE DATA ANALYSIS AND
INTERPETATIONS ARE AS FOLLOWS:

1. Most of the people who are involved in the cryptocurrencies belong to the age
group of 16-22.

2. Almost every person in this age group is familiar with the concept of
cryptocurrencies or has heard about it.

3. Most of the youth agree with the fact that there has been a sudden increase in
interest of youth towards cryptocurrencies during past few years.

4. Around 65% of people got to know about crypto space through social media,
showing the social media presence of cryptocurrencies and their influence.

5. Most of the people already have or want to experience what it feels like to work in
the crypto space and test their skills.

6. People are looking for chances to work in the crypto world due to the hype around
it.

7. People are mostly indulging in these activities either to earn money and livelihood
or to check out what the crypto world has to offer.

54
CONCLUSION

In conclusion, this sudden change of interest among youth is great and beneficial to
them and also towards society. More and more people are becoming part of this wave
day by day.

Bitcoin broke a key resistance level making investors believe there is further
upside. Rising inflation and the potential for even more stimulus continues to push
people to safe-haven assets.

The younger generations have an advantage over those older than them because of
their early exposure to these developing technologies. With less to learn, it’s easy to
see why millennials and zoomers are choosing to invest their finances and time in
cryptocurrencies.

With this advantage, we will most likely see more and more examples of youth
who’ve made their fortune early on thanks to an early investment in cryptocurrencies.
It may not be the traditional way to make money off of investments but
cryptocurrencies and the blockchain are proving to be viable options for the youth.

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 CHAPTER-14

BIBLIOGRAPHY

56
www.wikipedia.com
www.investopedia.com
https://www.analyticsinsight.net
www.slideshare.net
www.blog.ipleaders.in
www.financialexpress.com
https://docs.google.com/forms
www.academia.edu
www.scroll.in

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