ABSTRACT

Cryptocurrency, also referred to as crypto, denotes a form of digital currency secured by cryptography, distinct from traditional currencies. It operates in a decentralized framework without centralized oversight, allowing transactions and the creation of new currency units outside traditional banking validation. 

In India, digital payment systems have progressed, notably the Unified Payment Interface (UPI), which ensures seamless, affordable, and secure transactions, thereby enhancing India’s role in the global digital payments landscape. Furthermore, the introduction of the Digital Rupee (e₹) as a Central Bank Digital Currency (CBDC) by the Reserve Bank of India aims to bolster liquidity, settlement reliability, and environmental sustainability by reducing the carbon footprint associated with currency production and management. Despite its growing adoption, significant concerns persist regarding its potential use in money laundering and terrorism financing.

This study aims to assess the impact of cryptocurrency on Indian economy, analyse the current status and future prospects of cryptocurrency in India, evaluate the significance and perceptions of investors towards cryptocurrencies. This research provides an opportunity to enhance analytical and technical skills for proposing solutions to address the issues of anonymity and illegal usage of cryptocurrency, offering insights into the digital currency revolution and  the cryptocurrency market in India.

INTRODUCTION

The evolution of money has progressed from barter systems to physical coins, then paper currency, and now into the realm of digital currencies, significantly shaping societal functions, displaying the interplay of finance and technology, commonly known as Fintech. Money serves as a medium for buying and selling goods and services, standard unit for valuing assets and a means of storing value for future use. The electronic wallet systems operated by private companies have made the economy fluid and technical, digital currencies come in three main types: stablecoins, cryptocurrencies, and central bank digital currencies (CBDCs). The rapid rise in digital currency adoption can be attributed to several factors, including cost reduction in managing physical cash, promoting financial inclusion, facilitating faster and round-the-clock payments, enhancing settlement system efficiency, and easing cross-border payments. It removes barriers related to socio-economic status, connectivity, and physical banking infrastructure, thereby encouraging greater participation in the financial system by previously underserved populations. Digital currencies also offer anonymity boosting cashless transactions, providing consumers with diverse payment options.

Cryptocurrencies offer potential benefits by addressing issues of social trust and financial access, aiding economic growth in developing countries through financial inclusion, fund tracking, and poverty alleviation. Decentralized cryptocurrencies offer trust-building features like accountability and transparency, facilitated by blockchain technology. They enable secure transactions without reliance on trust in a centralized authority, allowing global transactions without geographical restrictions. Overall, blockchain technology and cryptocurrencies are closely intertwined, with blockchain serving as the underlying technology that powers cryptocurrencies by providing a secure and transparent mechanism for recording and verifying transactions. However, there are concerns regarding the potential misuse of cryptocurrencies for illegal activities like funding terrorism, facilitated by anonymity in transactions. In India, initial apprehensions about cryptocurrencies are fading, with legislators and regulators warming to the idea. The cryptocurrency market in India is growing, evidenced by increased transactions and investments. However, regulatory uncertainty persists, as cryptocurrencies remain unregulated and lack legal tender status.

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