AN INTRODUCTION: CRYPTOCURRENCY AND BLOCKCHAIN

Cryptocurrency: An insight

Cryptocurrency can be denoted as a new form of digital asset which is based on a network that is distributed across a series of computers. The word ‘cryptocurrency’ is derived from the encryption techniques which are used to secure the network.

Cryptocurrency has one name which overpowers all others. The ‘money of the internet’ has come to be known as bitcoin for most people. Bitcoin is the undisputed king of cryptocurrencies. The popularity of the same has risen in over the last 8 years. A major fact about bitcoin is that when making transactions on the platform, name or identity of the individual is not disclosed but only the public address is available.

Blockchain: An insight

There also comes another name in the market which has held some major share of investments. There is a blockchain technology which refers to a ledger or a database which is distributed. Blockchain is a digital ledger that is dispersed across networks. It is used in the cryptocurrency space to securely record every transaction between users. DLT or Distributed Ledger Technology was used by bitcoin in 2009 by Satoshi Nakamoto. Blockchain is simply not just limited to bitcoin only. The mystery technically can never be solved whether bitcoin came first or blockchain, just like the chicken egg theory.

About the blockchain technology, it is often termed as a thriving future technology that would change the shape of many industries across the globe. It basically provides a way to record and transfer data which is transparent, safe and auditable. The blockchain technology is disrupting many industries, such as banking. It is giving access to people for transferring of funds across the globe, including third world countries that don’t have the means to engage in traditional way of banking. Billions of people can transfer money from one country to another at a very low fee. Barclays has also made international payment system out of the blockchain technology.

Secondly, industries such as cyber security is following the blockchain technology as it is encrypted using advanced cryptography which makes it difficult for anybody to hack or make changes to the data without any authorisation. The technology does not engage middlemen which eliminates the leaking of vital data in cyber security. Another aspect wherein blockchain tries to dive in is forecasting. The technology plans to change the way how one does research, consulting, analysis and forecasting. The technology also takes over to overlook whether the intended party is receiving donations and whether it the charity made is going in the right hands or not. Blockchain will change the face of charity too as many people step back when they see the donation made by them does not go in the right hands.

The bitcoin blockchain is permanent ledgers wherein anybody can see how many bitcoins you are holding if they know your public address. It is displayed publicly. But if the users want to hide their transactions, then they can use VPN to hide their trade details. Even in these circumstances, it becomes difficult to trace a public address and not impossible. Bitcoins are mined on the blockchain network, and they come into existence when miners successfully mine Bitcoin blocks. One fact about bitcoin being, that its supply is finite. There will only ever be 21 billion bitcoins and not more.

Legality of Cryptocurrency in India

As it stands to date, bitcoin buying, selling, trading, or mining is not illegal by any law in India.

In its notification, RBI had issued a ban on banks’ dealings with crypto businesses in April 2018. That is when the case law of Internet and Mobile Association of India v. Reserve Bank of India[1] (RBI) came into being about legality of cryptocurrencies in India.

The Supreme Court held that RBI must show some semblance of damage suffered by its regulated entities as this was the primary reason of banning the cryptocurrencies in the first place. But RBI could not show any. The court finally held that it cannot hold the impugned measure as proportionate. The impugned order by the RBI was hence quashed. It has thus become a welcome measure for cryptocurrencies, blockchain technology and exchanges across the country.

Legality of Cryptocurrency: With special focus on United States and other International scenario

As a matter of fact, blockchain is not just limited to be used in cryptocurrency technology. It has broadened its horizons to new areas. The United States of America has recognized this phenomenon. U.S. state governments have realised how to deliver public services with the help of potential of the technology. Also, the second generation blockchain such as Ethereum have a thing called ‘smart contracts’ – it basically refers to a software code stored on the blockchain that would execute a transaction automatically when certain conditions are fulfilled.

In 2017, the state of Illinois took a headstart with the Illinois Blockchain initiative, which calls in for a combination of state and county agencies to “collaborate to explore innovations presented by Blockchain and distributed ledger technology”.

The Global scenario depicts that many countries such as Japan, Russia, Australia and Venezuela which have given bitcoin the legal tender and are regulating it. On the other hand, countries like Bangladesh, Thailand and Vietnam have tried to ban it.

Conclusion

It is ideal to conclude that the blockchain technology is booming in the world and it is used for varied purposes that are, from voting counting to technology related to bitcoins. Digital currencies, and especially those which have an embedded decentralised payment mechanism based on the use of a distributed ledger called the blockchain technology.

Seek Professional Advice

Prodigy Legal LLP consists of a team of legal experts who are adept at understanding the changing dynamics of cryptocurrency and blockchain within the national and International spheres. Hiring a professional can save you from a lot of ambiguity. You might be in a situation wherein your start-up is at the forefront of the next wave of blockchain technology and you will require funding. You can very well delegate the responsibility of navigating through the legal and regulatory minefields of cryptocurrency and blockchain to the team of professionals at Prodigy Legal LLP.

About the Author

Astha Tarwani, a young professional who has deep interest in keeping up with the changing dynamics of cryptocurrency and blockchain has authored this article. Her area of practice also includes in dealing with Intellectual Property Laws and Corporate Laws.

[1] Writ Petition (Civil) No.528 of 2018