AN ANALYTICAL STUDY ON OPPORTUNITIES AND CHALLENGES OF

CRYPTOCURRENCY IN INDIA

Introduction:
On Oct. 31, 2008, Satoshi Nakamoto, an assumed pseudonymous person(s),
introduced a paper named "Bitcoin: A Peer-to-Peer Electronic Cash System". The aim
was to make decentralized computerized cash that would work without a national bank
through a publicly released network utilizing cryptography to check and approve
exchanges. There would, under this model, be no requirement for any go-betweens and
every exchange would be recorded on a public record called a blockchain. In any event
since 1983, when an American cryptographer David Chaum presented an unknown
cryptographic computerized cash called "ecash", endeavours had been made by
numerous people to make an option in contrast to fiat cash, that is monetary standards
which infer their incentive through government guideline. Yet, the development of
Bitcoin was the first run through a genuine advancement was made. From that point
forward, different other digital forms of money have sprung up, each utilizing blockchain
innovation to record the exchanges. The online media goliath Facebook declared in
June 2019 that it expected to dispatch its open type of digital currency, Libra.

In India, after the dispatch of Bitcoin ; various cryptographic money trades started to
work. Be that as it may, they were working in what was actually an administrative
vacuum. There was not just no way away from what a cryptographic money was yet
there was likewise no law that disallowed or controlled their utilization. The present
circumstance won until April 2018, when the Reserve Bank of India gave a round, not
forbidding the utilization of digital forms of money themselves, however the arrangement
of banking administrations to any individual who managed such monetary standards.
This adequately implied, however, that any trade which encouraged the utilization of
digital forms of money stood thwarted.But now, in what may come as a brief alleviation,
if nothing else, to the individuals who bargain in these monetary standards, the
Supreme Court has, in Internet and Mobile Association of India v. RBI 1, suppressed the
RBI's round.

In a 180-page long judgment, composed by Justice V Ramasubramanian, the court

found that while the RBI has the ability to manage Virtual Currencies, the forbiddance
forced through the April 2018 round is unbalanced, and, in this way, ultra vires the
Constitution.In the court's conviction, without any authoritative ban, the matter of
managing in these monetary standards should be treated as a real exchange that is
secured by the crucial option to continue any occupation, exchange or business under
Article 19(1)(g) of the Constitution.
1 Writ Petition (Civil) No.528 of 2018
While, until this point, digital forms of money are unregulated in India, generally, the RBI
has prohibited managing cryptographic forms of money and, subsequently, digital
currency partners are supporting control of the digital currency domain.
Notwithstanding, given that money is a natural component of any state and as digital
currencies attack this space, guideline of digital money might be dependent upon
weighty guidelines and oversight from different specialists, for example,
(1) the RBI, for controlling cryptographic forms of money as a legitimate delicate;
(2) the Directorate of Enforcement, for restricting of utilization of digital money in
monetary Offences;
(3) the Department of Economic Affairs, for impedance of digital forms of money in
financial strategies of state;
(4) the Securities and Exchange Board of India (SEBI), for utilization of cryptographic
forms of money in security agreements; and
(5) India's duty specialists, for charge suggestions on exchanging digital currencies. It
might, hence be a huge undertaking for India's assembly to fabricate a powerful system
for managing each part of cryptographic money trade.Certain essential angles, for
example, the obscurity of clients and the powerlessness to screen crypto exchanges
additionally represent a high danger to security of the state's advantages, which should
be managed.

Types of Cryptocurrency2:
Cryptocurrency is designed to work as a medium of exchange. The number of
cryptocurrencies available over the internet is over 1600 and growing. A new
cryptocurrency can be created at any time. By market capitalization, Bitcoin is currently
the largest blockchain network, follow by Ripple, Ethereum and Litecoin
1. Bitcoin (BTC) One of the most commonly known currencies, Bitcoin is
considered an original cryptocurrency. It was created in 2009 as an open-source
software.Using Blockchain Technology,Bitcoin allows users to make transparent
peer-to-peer transactions. All users can view these transactions; however, they
are secured through the algorithm within the blockchain. While everyone can see
the transaction, only the owner of that Bitcoin can decrypt it with a “private key”
that is given to each owner. Unlike a bank, there is no central authority figure in
Bitcoin. Bitcoin users control the sending and receiving of money, which allows
for anonymous transactions to take place throughout the world.
2. Litecoin (LTC) Litecoin was launched in October 2011 as an alternative to
Bitcoin. Like other cryptocurrencies, Litecoin is a peer-to-peer cryptocurrency and
open source-source software project released under the MIT/X11 license. Its
2 IJRAR article on challenges of cryptocurrency
http://ijrar.com/upload_issue/ijrar_issue_20543250.pdf last visited on 19th march 2021
 creation and transfer is based on an open source cryptographic protocol and it is
completely decentralized.Litecoin is different in some ways from Bitcoin. A few
differences between these digital currencies are: The Litecoin network aims to
process a block every 2.5 minutes but Bitcoin takes 10 minutes.this allows
Litecoin to have faster transaction confirmation. The coin limit for Bitcoin is 21
million and Litecoin is 84 million. Experts say that Litecoin is more complicated to
create and more expensive to produce because it uses different algorithms called
scrypt and FPGA (Field Programmable Gate Array)and ASIC (Application
Specific Integrated Circuit) devices made for mining
3. Ethereum (ETH) Ethereum is a type of cryptocurrency which was proposed in
late 2013 by VitalikButerin, a crypto currency researcher and programmer. It was
initially released in July 2015. It is an open source platform based on blockchain
technology. While tracking ownership of digital currency transactions,
Ethereumblockchain also focuses on running the programming code of any
decentralized application, allowing it to be used by application developers to pay
for transaction fees and services on the Ethereum network.
4. Ripple (XRP) Ripple is a real-time gross settlement system, currency exchange
and remittance network created by Ripple Labs Incorporation, a US based
company. Ripple was released in 2012 that acts as both a cryptocurrency and a
digital payment network for financial transactions. It’s a global settlement network
that is designed to create a fast, secure and low-cost method of transferring
money. Ripple allows for any type of currency to be exchanged, from USD and
Bitcoin to gold and EUR and connects to banks, unlike other currencies. Ripple
also differs from other types of digital currencies because its primary focus is not
for person-to-person transactions, rather for moving sums of money on a larger
scale.
5. Bitcoin Cash Bitcoin Cash is a type of digital currency that was created to
improve certain features of Bitcoin. Bitcoin Cash increased the size of blocks,
allowing more transactions to be processed faster. 6. Ethereum Classic
Ethereum Classic is a version of the Ethereum Blockchain. It runs smart
contracts on a similar decentralized platform. Smart contracts are applications
that run exactly as programmed without any possibility of downtime, censorship,
fraud or third-party interface. Like Ethereum, it provides a value token called
“classic ether,” which is used to pay users for products or services.

OPPORTUNITIES OF BITCOIN IN INDIA

● Entrepreneurs within the country are seeing this as a natural opportunity for the
proliferation of Bitcoin and other cryptocurrencies within the country. It’s reported
 that India currently has around 30,000 Bitcoin owners in the country, and that
number is expected to grow.
● For consumers is a payment system which does not require to provide private
credentials
● To marketers it is away to save transaction cost • For emigrants it is an
instrument to send remittances without charges

CHALLENGES OF BITCOIN IN INDIA 3

The type of digital forms of money isn't liberated from some monetary issues and
security concerns. I dissected a few investigations and digital currency stages and
furthermore noticed some cryptographic money offering gatherings to investigate
difficulties and issues that exist in such virtual wonders. The principle issues and effects
of digital money can include:

I. Security dangers: Hackers and vindictive clients can make however much they need
from virtual money in the event that they break the framework and know the technique
for virtual cash manifestations. This will prompt the capacity to make counterfeit virtual
cash or take virtual money simply by changing the records adjusts. For instance, selling
in-game virtual things and virtual cash is against World of Warcraft (WoW) game
strategies. Along these lines, numerous clients sign into WoW gold offering sites to
purchase virtual gold to pay for virtual things that they need. A large number of WoW
gold selling sites are not solid and they are helpless against hacking and numerous
clients are grumbling about paying genuine cash to no end or for counterfeit virtual
money. Breakdown worries in digital money frameworks: Unlimited giving of virtual cash
in the assortment of virtual networks will prompt financial issues since its giving did not
depend on the interest and supply. It is workable for certain suppliers like Second Life to
give limitless Linden Dollars and increment their virtual thing costs to acquire genuine
incomes. Then again, it will experience the ill effects of swelling and monetary issues
prompting breakdown in the virtual cash framework. Effect on genuine financial
frameworks: Since some virtual cash frameworks are associated with certifiable money
related frameworks, they may influence the requests and supply offices of true cash.
For instance, empowering clients to buy virtual and genuine products and ventures with
virtual cash in certain stages may lessen the requests on genuine cash. Clients will
presently don't rely upon genuine cash to purchase what they need and they will utilize
virtual cash all things being equal. Then again, a few stages empower clients to trade
their virtual money with genuine cash and this will expand the requests on true money.

3 Reseach paper on challenges of cryptocurrency

https://www.researchgate.net/publication/324770908_The_Growth_of_Cryptocurrency_i
n_India_Its_Challenges_Potential_Impacts_on_Legislation last visited on 20th march
2021
This vacillation will influence the genuine financial frameworks. Gold cultivating
chances: Gold cultivating term is extremely well known in China and non-industrial
nations. Gold ranchers are players who play in friendly games, for example, World of
Warcraft to acquire gold, which is the virtual Currency of the game, and afterward sell it
for genuine cash. The focus on purchasers are the players who need more an ideal
opportunity to play and go after acquiring virtual money. Indeed, colossal income is
created from gold cultivating interaction and it isn't controlled and directed. This will
build extortion and monetary dangers where virtual cash is traded with genuine cash in
an inconsistent climate. Vacillation in virtual cash esteem: According to Chow and Guo
study, it is seen that when the ubiquity of a virtual local area drops, the estimation of its
virtual money will be downgraded. For instance, clients who own 1000 units of virtual
money can purchase from an assortment of 100 things. On the off chance that the
supplier of that virtual cash drops, clients can just purchase from 10 things with their
1000 units since dropping will be reflected in less merchandise and ventures particularly
in shut virtual networks.

II. Illegal tax avoidance: Money laundering is one danger that is probably going to
ascend with the utilization of VC particularly with stages that empower clients to trade
virtual cash with genuine cash. In a useful case that happened in Korea in 2008, the
police captured a gathering of 14 people for washing $38 million acquired from selling
virtual cash. The gathering changed over the measure of $38 million, which is produced
by gold cultivating, from Korea to a paper organization in China as installments for buys.
Obscure character chances: Since making a record in most virtual cash stages, for
example, social games and informal communities isn't validated, monetary exchanges
can't be checked well overall. Gamers and clients can make more than one record with
obscure characters and use them for illicit exchanges. It is extremely unlikely to
perceive the wellspring of making or liquidating out the virtual monetary standards. This
prompts powerlessness to follow the exchanges if there should be an occurrence of
illegal tax avoidance doubt. Additionally, an obscure personality will empower crooks to
get paid with virtual money for their wrongdoings.

III. Bootleg market for digital money: The monetary situation of some friendly games, for
example, Second Life and World of Warcraft are adequately developed to make a
bootleg market for purchasing and selling their virtual cash. The expanding notoriety of
virtual cash in an online climate has prompted a flourishing bootleg market for
exchanging virtual cash with genuine cash. By noticing a few social games' gatherings,
some extortion cases have been raised and talked about between clients. For instance,
when a gamer chooses to stop from a game, he/she might need to sell the possessed
virtual money by offering them in the game's gatherings. The method of getting the
installments is dangerous since numerous pernicious clients may not finish the
installment or they debate subsequent to paying. For this situation, they will get their
cash back in addition to the virtual money.

IV. GovernmentRegulation: Indian government's remain towards Bitcoin is the excellent

test for its development. The fate of cryptographic money is suspicious in India for the
time being. At present in 2019 RBI declared that cryptographic money won't be
considered as a lawful delicate. Since it is totally decentralized. Security Threat :
Hackers and noxious clients can make however much they need from virtual money in
the event that they break the framework and know the strategy for virtual cash
manifestations. This will prompt the capacity to make counterfeit virtual money or take
virtual cash simply by changing the records adjusts. Clients will presently don't rely upon
genuine cash to purchase what they need and they will utilize virtual cash all things
being equal. Then again, a few stages empower clients to trade their virtual cash with
genuine money and this will build the requests on certifiable cash. This interest supply
vacillation will adversely influence the genuine money related frameworks. Utilizing for
Alleged exercises : Several episodes have happened expressing that Bitcoins have
been utilized for unlawful and criminal operations around the planet like illegal tax
avoidance, dark showcasing, tax avoidance and so forth No Ombudsman:There is no
gathering, where a client can connect for any assistance or complaint, because of which
Indian purchasers are being presented to value-based and enlightening dangers.
Impending section of India's own Cryptocurrency. According to a business standard
report the Indian government will acquaint its own Cryptocurrency comparable with
Bitcoin called "Lakshmi".It's conversation is going on. Profound insertion on nearby
money: EY's Global Innovation Leader Paul Brody has demonstrated that Bitcoin and
other cryptographic money do not have any solid down to earth use in the nation, given
that neighborhood cash is profoundly installed in the economy. Human blunder in online
trades: individuals running unregulated online trades that exchange money for Bitcoins
can be untrustworthy or bumbling. The solitary contrast is that ordinary financial
misfortunes are incompletely guaranteed for the bank clients, while Bitcoin trades have
no protection inclusion for clients.

CONCLUSION
Digital money in friendly games: The outcomes demonstrated that 70.9% of the
members are utilizing virtual cash in friendly games where 29.1% don't utilize them. A
few social games have been associated with the poll including Second Life, FarmVille,
CityVille, Farmhouse and Travian and every one of them have virtual cash structure in
their playing exercises. A huge extent of the studied members who utilize virtual money
in friendly games demonstrates the enormous volume of exchanging virtual cash web
based games and furthermore shows the solid effect of carrying out VC in internet
games. Unmistakably the utilization of virtual money in friendly games is developing
significantly. This development is likewise upheld from different reports and studies in
the writing. For instance, in excess of 100 Chinese are utilizing Q Coin which is the
virtual money given by Tencent game organization. In addition, around 7.6 million
dynamic parts in World of Warcraft social games are utilizing WoW gold. It is accounted
for that there are 2.8 million day by day exchanges finished at the game's bartering
house.
Digital money in distributed organizations: Virtual cash in shared organizations comes
toward the finish of the rundown regarding spread however it tends to be at the top in
different terms like usefulness and control. The reviewed Internet clients were found out
if they have caught wind of this kind of virtual money, particularly about
Bitcoin. Around 90.32% of them have not caught wind of Bitcoin or some other shared
virtual cash structure where just 9.68% have found out about such money. This low
discernment and spread pace of decentralized virtual cash in our pilot study can be
advocated dependent on certain reasons. The restricted types of companion to
peer VC where some of them were as yet unreasonable ventures at the hour of the
directed examination. Besides, a significant number of shared VCs were not exchanged
for all intents and purposes and there were very few merchants tolerating such money
as an installment strategy. Nonetheless, discernment and mindfulness rate is probably
going to be higher in the current time because of late distributions of the virtual money
idea and furthermore the expanded merchants who are tolerating this Cryptographic
money particularly Bitcoin offers another, powerful and appealing model of installment
techniques that can help organizations and administrators incomes. It additionally gives
elective techniques for installment, aside from genuine cash, that empower clients to
make monetary exercises like purchasing, selling, moving and trading without any
problem. Digital money can carry more certain progressions to the e-Business and e-
Payment area. Anyway digital currency doesn't get that quite a bit of trust yet.
Numerous worries, difficulties and issues are existing in numerous digital money stages.
Until digital currency is in effect very much managed and controlled, clients need to play
it safe of utilizing such virtual cash. So the absence of enactments is considered as the
principle worry in digital currency frameworks. The quietness of the RBI on the
administrative status of Bitcoins may end up being harming. An industry has developed
around Bitcoins in India-brokers, trades and vendors who acknowledge installments in
Bitcoins. Bitcoins have effectively acquired wide acknowledgment around the globe
subsequently forbidding them would not be an alternative in India. All things considered,
this industry should be directed. The sooner this is done, the better.