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The Emergence of Cryptocurrency in India and Its Implications on Investments

The Emergence of Cryptocurrency in India and Its Implications on Investments

Mohammed Umair (St. Joseph's University, India)
Copyright: © 2023 |Pages: 13
DOI: 10.4018/978-1-6684-5691-0.ch003
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Abstract

Investing in the unregulated cryptocurrencies has showed a rising tendency since 2020, despite uncertainty surrounding its future in India. There is no ban on the use of cryptocurrencies in India, nor is there any regulation governing their actual use. This uncertainty is disturbing Indian startups developing blockchain-based products. But this hasn't altered investors' positions in investing in cryptocurrencies; they continue to be positive. For longer-term investments, investors have historically employed fundamental analysis. By analyzing the underlying company's operations and the state of its industry or the overall economy, fundamental analysis seeks to find stocks with high growth potential at fair prices. The issue with conducting a fundamental analysis of cryptocurrencies is that they cannot be evaluated using the same criteria as conventional businesses. Therefore, the authors must focus on several frameworks. Finding good metrics is the first step in that approach. This chapter examines the emergence of cryptocurrency in India and its implications on investments.
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Cryptocurrency In India

Investing in the unregulated digital asset, especially Bitcoin, has showed a startling rising tendency since 2020, despite uncertainty surrounding its future in India. The scale and investment appeal of cryptocurrencies have increased, making it easier for people to acquire, sell, and trade cryptocurrencies both in India and internationally. 7.3% of Indians owned cryptocurrencies in 2021, according to the United Nations Conference on Trade and Development Report 2021. Cryptocurrencies are unaffected by influence from any central body or government. However, they have had a very awkward relationship with the Indian government.

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    In the year 2018, a warning was issued that virtual currencies in India are not recognized as legal money. A committee was established by the finance ministry to craft legislation regarding cryptocurrencies in India. However, there was no virtual currency ban.

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    In 2019, A bill prohibited cryptocurrency mining, keeping, selling, issuing, transferring, and use. People would have to pay a large fine or spend up to 10 years in prison if proven guilty of breaking the law.

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    In the year 2020, the Supreme Court overturned the RBI's 2018 ban on cryptocurrencies. The ruling by the Apex Court is seen as a landmark decision, particularly for India's start-ups and virtual currency business.

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    In the 2021, In the Rajya Sabha, the minister of finance, brought up the subject of cryptocurrencies. The minister claimed that while the RBI and SEBI will raise awareness, the government had not yet taken any meaningful action to outlaw cryptocurrency promotions in India.

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    The Reserve Bank of India (RBI) suggested a ban on cryptocurrencies in July 2022, citing their “destabilizing consequences” on the nation's monetary and fiscal stability.

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    In the Union Budget for 2022–2023, the Government of India stated unequivocally that any transfer of virtual currency or cryptocurrency assets will be subject to a 30% tax deduction. Virtual assets and cryptocurrencies used as gifts will be taxed in the recipient's hands.

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    The Ministry of Finance in the Union Budget for 2022–2023 also announced the establishment of a CBDC known as the digital rupee. Is the digital rupee, however, a cryptocurrency? Here's some background.

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