The impact of cryptocurrency on the currency market in India

Cryptocurrency is a form of digital currency which is stored in an electrical form. Its supply is not determined by any bank or central authority and it has a network which is completely decentralized. In order to check the misuse, cryptocurrencies are being brought under the regulatory net. Japan was the first country to regulate cryptocurrencies and US is currently laying down the guidelines.

India plays a very small role in the global market of cryptocurrencies which is about only 2% of the total market cap. The RBI has warned about the risks associated in the cryptocurrencies. The IT department recently conducted a survey over major exchanges and triggered issuance of the income tax demand notice by the department to all the users of the exchanges. Global cryptocurrency market cap had crossed $650 billion in the last week and then declined to $480 billion in a week. The rapid proliferation of the cryptocurrency ecosystem in the country with its benefits removing the limitations of the monetary system has left the Indian market uncertain.

Kolonial, a pizzeria in Mumbai became the first restaurant in the country to accept payments in Bitcoin since 2013. Further, in 2016, Suryawanshi, a restaurant in Bengaluru became the second eatery to do so. A restaurant in Chennai has also followed the trend in 2017. However, the finance ministry has stated that it is not a currency and has left people to admit as whether to accept cryptocurrency as a payment or not.

Some of the largest companies in the world have announced that they will soon be dealing in bitcoin which increases the chances of a secure future of cryptocurrency. These companies include Ernst & Young Switzerland, KPMG, PwC, Deloitte and Nasdaq.

Currently, only a few merchants are accepting the currency. It allows people to buy air tickets through Flybits. Pocketbits helps support popular sites by paying them in fiat currency like Myntra and Amazon. The number of merchants is constantly being added to this list.

With bitcoin, the transfer is instant and money once sent is sent. It cannot be reversed like in a bank. Further, the market is highly volatile and dips every time a government bans cryptocurrency per se or a byproduct of cryptocurrency. The currency is not regulated by government or Banks. It is impossible to get the money back once it has been sent and even police officials cannot help since it is not recognized as a currency.

The biggest hurdle for Indian investors is the confusion about its legal status. While it has not been declared illegal, cryptocurrencies are not recognized by RBI or any other banking and financial authority in the country as a currency. It is also difficult to track illegal activities in the cryptocurrency space like terror financing and money laundering. It lowers the chances of cryptocurrencies becoming mainstream in the country while leaving the future of the market uncertain. The GST regime is also struggling with its own implementation and addressing the area of cryptocurrency looks farfetched.