Cryptocurrency and Bitcoin have once again grabbed public attention in India. Two major developments are driving the conversation:
- Bitcoin’s New Milestone: The world’s most popular cryptocurrency, Bitcoin, has surged past the $94,000 mark for the first time, reaching an all-time high.
- Political Controversy: Allegations have surfaced linking prominent Maharashtra political figures Nana Patole (Congress) and Supriya Sule (NCP) to alleged illegal Bitcoin activities for election funding.
These events have reignited debates on the nature of cryptocurrency, the difference between Bitcoin and other digital currencies, and the ongoing regulatory uncertainty in India.
Understanding Cryptocurrency and Bitcoin: What Sets Them Apart?
Cryptocurrency:
Cryptocurrency refers to a broad category of digital or virtual currencies secured using cryptographic technology. These currencies operate on decentralized networks powered by blockchain technology, making them nearly impossible to counterfeit or double-spend. Examples include Ethereum, Litecoin, Ripple, and Bitcoin.
- Decentralized Nature: No central authority, such as a government or bank, controls cryptocurrencies.
- Blockchain Backbone: Blockchain serves as the foundational technology for cryptocurrencies, ensuring secure and transparent transactions.
- No Physical Form: Cryptocurrencies exist only in digital form, with protocols determining their supply and circulation.
Bitcoin:
Bitcoin is a specific type of cryptocurrency and the first to utilize blockchain technology. Launched in 2009, Bitcoin remains the most widely recognized and traded digital asset globally.
- Popularity: Bitcoin accounts for the largest market share among cryptocurrencies.
- Blockchain Pioneer: The Bitcoin blockchain was the first implementation of the blockchain concept.
- Fixed Supply: Unlike fiat currencies, Bitcoin has a limited supply of 21 million coins.
While Bitcoin is a cryptocurrency, not all cryptocurrencies are Bitcoin. Think of Bitcoin as a brand under the larger umbrella of cryptocurrencies.
Bitcoin’s Record-Breaking Surge
Bitcoin’s price recently crossed the $94,000 mark, marking a historic milestone. By early trading on November 20, it was valued at $92,104 in Asian markets. This surge has been attributed to rising global adoption, particularly by institutional investors.
Additionally, reports suggest former U.S. President Donald Trump’s social media venture is exploring partnerships with crypto firms, adding to Bitcoin’s momentum.
Legal Status of Cryptocurrencies in India
India has long grappled with regulating cryptocurrencies, creating a mix of uncertainty and cautious optimism among crypto enthusiasts.
- Taxation without Legitimacy:
In 2022, the Indian government announced a 30% tax on profits earned from cryptocurrency transactions. However, taxation does not equate to legality. Cryptocurrencies remain in a gray area, neither fully legal nor explicitly banned. - Regulatory Framework in Progress:
The government has been working on a regulatory framework to define the status and use of cryptocurrencies. Until this framework is finalized, the legal ambiguity continues.
The Reserve Bank of India’s Concerns
The Reserve Bank of India (RBI) has consistently expressed reservations about cryptocurrencies.
- Economic Stability Risks: RBI warns that private digital assets like Bitcoin could disrupt macroeconomic stability.
- Monetary Control: RBI Governor Shaktikanta Das argues that widespread adoption of private cryptocurrencies could undermine the central bank’s control over the money supply.
Previously, the RBI had proposed a blanket ban on cryptocurrencies. However, this proposal was struck down by the Supreme Court in 2021, allowing crypto-related businesses to operate.
What Does the Finance Ministry Say?
Finance Minister Nirmala Sitharaman has emphasized that cryptocurrencies issued by private entities cannot be classified as “currency.” For a digital asset to be considered a currency, it must be issued by the Reserve Bank of India, such as the proposed Digital Rupee (CBDC).
Sitharaman has also stressed the importance of international collaboration for effective regulation or banning of cryptocurrencies, recognizing the global nature of digital assets.
Political Controversies Surrounding Bitcoin in India
Bitcoin is also making headlines due to its alleged use in political funding. In Maharashtra, accusations have surfaced against Congress leader Nana Patole and NCP leader Supriya Sule, claiming they are involved in illicit Bitcoin transactions to finance election campaigns.
While these allegations are yet to be substantiated, they highlight the potential misuse of cryptocurrencies in unregulated environments.
Efforts Toward Regulation
An inter-ministerial group (IMG) consisting of officials from RBI, SEBI, and the Finance Ministry is currently drafting a comprehensive cryptocurrency policy. This framework aims to address stakeholder concerns and strike a balance between innovation and risk management.
Until the policy is finalized, cryptocurrencies remain in a precarious legal position, with both opportunities and challenges for investors and businesses alike.
Cryptocurrencies like Bitcoin continue to captivate investors and governments worldwide, but in India, their legal and regulatory future remains uncertain. As the conversation evolves, clarity on their status will be crucial for shaping India’s crypto ecosystem.
