CHAPTER 1

INTRODUCTION
Sr no. Particulars Page no.
1  Introduction:
What is cryptocurrency?
Top cryptocurrencies in India.

2 Problem Definition:
Introduction
Relevance
Need
Objective of Research
Hypothes
3 Data Collection & Research Methodology.

4 SWOT analysis

5 Benefits and criticism of cryptocurrency

6 Cryptocurrency in India
Introduction
Timeline of RBI and cryptocurrency
Laws related to cryptocurrency
Impact on economy

7 Investment in cryptocurrency
Introduction
Investors in cryptocurrency
Future

8 Data analysis and Interpretation

9 Hypothesis analysis

10 Conclusion
11 Bibliography
12 Annexure
INTRODUCTION
 Cryptocurrency
In the modern digital era, the concept of money has evolved far
beyond traditional cash and banking systems. One of the most
revolutionary innovations in this space is cryptocurrency—a form of
digital or virtual currency that uses cryptography for secure
transactions and operates independently of a central authority such as
a government or bank.

The term "cryptocurrency" is derived from the combination of

"crypto" (meaning encryption) and "currency" (meaning a system
of money in use). These digital currencies rely on blockchain
technology, a decentralized ledger that records all transactions across
a network of computers, ensuring transparency and security.

The first and most well-known cryptocurrency, Bitcoin, was

introduced in 2009 by an anonymous entity known as Satoshi
Nakamoto. Since then, thousands of other cryptocurrencies have
been created, including Ethereum, Ripple (XRP), Litecoin, and many
more. These are often referred to as altcoins (alternative coins).

Cryptocurrencies are designed to be secure, anonymous, and efficient

for peer-to-peer financial transactions. Unlike traditional fiat
currencies, they are not regulated by any central institution, which
makes them resistant to government interference or manipulation.
This decentralization is one of the main attractions for investors and
tech enthusiasts alike.

However, along with their benefits, cryptocurrencies also come with

certain challenges, such as price volatility, regulatory uncertainty,
and security risks. Despite these concerns, the use and acceptance of
cryptocurrencies continue to grow, influencing financial markets,
investment strategies, and even government policies worldwide.

This introduction serves as the foundation for a deeper exploration

into the world of cryptocurrency—its history, how it works, the types
of digital currencies available, and the risks and rewards associated
with investing in them.
What is cryptocurrency?
Introduction

In the modern age of digital innovation, the world is witnessing a

significant transformation in how we perceive, use, and exchange
money. Among the most revolutionary changes is the emergence of
cryptocurrency—a decentralized, digital form of currency designed
to work as a medium of exchange through computer networks.
Unlike traditional currencies controlled by governments and central
banks, cryptocurrencies operate independently, without a central
authority, utilizing cryptographic techniques to secure transactions
and manage the issuance of new units.

Cryptocurrency is not just a new form of currency—it represents a

fundamental shift in financial systems, offering new opportunities
and posing fresh challenges. To fully grasp its significance, it is
essential to explore its origin, technology, types, and global impact in
depth.

Definition of Cryptocurrency

Cryptocurrency is a digital or virtual currency that uses cryptography

for security. The term "cryptocurrency" is derived from the words
"crypto" (meaning encryption) and "currency" (meaning a system of
money). This form of currency exists only in digital form and is
designed to be secure, transparent, and decentralized.

The core idea behind cryptocurrency is that transactions can be

conducted without the need for an intermediary such as a bank or
financial institution. Instead, these transactions are verified and
recorded on a blockchain—a public, immutable, and distributed
ledger maintained by a network of computers (also known as nodes).

The Origins of Cryptocurrency

The concept of digital currency was discussed for decades before the
actual development of cryptocurrency. However, the first practical
implementation came with the launch of Bitcoin in 2009 by a
mysterious developer (or group) using the pseudonym Satoshi
Nakamoto. Bitcoin introduced the idea of a peer-to-peer payment
system that operated independently of central banks and could be
transferred globally without the need for intermediaries.

The underlying technology of Bitcoin, known as blockchain, was the

true innovation. Blockchain solved the "double-spending problem"—
the risk that a digital currency could be copied and reused—by
ensuring that all transactions were verified by a network and
recorded in a permanent public ledger.

How Cryptocurrency Works

Cryptocurrencies operate through a combination of several

advanced technologies, including blockchain, cryptographic hashing,
and decentralized consensus mechanisms. Here's a step-by-step
look at how cryptocurrency transactions typically work:

1. Digital Wallets: Users store their cryptocurrency in digital

wallets, which contain public and private keys. The public key
acts as the address to which others can send cryptocurrency,
while the private key is used to authorize outgoing
transactions.
 2. Transactions: When a transaction is initiated, it is broadcast to
the network. The transaction includes details such as the
sender’s public key, the receiver’s public key, and the amount.
3. Verification: Network nodes validate the transaction using a
consensus mechanism, most commonly Proof of Work (PoW)
or Proof of Stake (PoS). In PoW, computers solve complex
mathematical problems to validate transactions and add them
to the blockchain.
4. Mining and Block Creation: Verified transactions are grouped
into blocks. In networks like Bitcoin, miners compete to solve a
cryptographic puzzle to add the next block to the chain and
receive a reward (newly minted coins and transaction fees).
5. Ledger Update: Once added to the blockchain, the transaction
becomes immutable. It cannot be altered or deleted, ensuring
transparency and trust.

Key Features of Cryptocurrency

Cryptocurrencies have several distinguishing features that set them

apart from traditional currencies:

 Decentralization: Most cryptocurrencies are not controlled by a

single entity. Instead, they operate on decentralized networks
of computers (nodes).
 Security: Advanced cryptographic techniques secure
transactions and wallets. Blockchain ensures that data cannot
be altered without consensus.
 Anonymity and Privacy: Transactions can be made without
revealing the real identity of users, although they are recorded
on a public ledger.
 Transparency: Every transaction is recorded on the blockchain
and is publicly accessible, providing transparency to users.
  Limited Supply: Many cryptocurrencies have a fixed supply
limit. For instance, Bitcoin has a cap of 21 million coins, creating
scarcity.
 Global Reach: Cryptocurrency can be transferred across
borders instantly, often with lower fees than traditional
banking systems.

Types of Cryptocurrencies

There are thousands of cryptocurrencies in existence today, each

with its unique use case, technology, and features. These are broadly
categorized as:

1. Bitcoin (BTC): The first and most widely recognized

cryptocurrency. It was created as a digital alternative to cash
and is often referred to as digital gold due to its store of value
properties.
2. Altcoins: These are alternatives to Bitcoin and include:
o Ethereum (ETH): Introduced smart contracts—self-
executing contracts coded into the blockchain.
o Ripple (XRP): Designed for fast and low-cost international
transfers.
o Litecoin (LTC): Offers faster transaction speeds than
Bitcoin.
o Cardano (ADA), Solana (SOL), Polkadot (DOT), etc.
3. Stablecoins: Pegged to stable assets like fiat currencies to
reduce volatility. Examples include Tether (USDT) and USD Coin
(USDC).
4. Meme Coins and Utility Tokens: Some cryptocurrencies, like
Dogecoin (DOGE) or Shiba Inu (SHIB), began as internet memes
but gained popularity due to social media hype. Utility tokens
serve specific purposes within blockchain ecosystems.
 5. Central Bank Digital Currencies (CBDCs): Government-backed
digital currencies under development in many countries (e.g.,
Digital Rupee in India).

Use Cases of Cryptocurrency

Cryptocurrencies have evolved beyond being merely digital money.

They are now part of larger ecosystems involving various real-world
applications:

 Payments: Used for online and in-store purchases globally.

 Remittances: Provide a low-cost alternative for cross-border
money transfers.
 Investments: Viewed as high-return assets by many investors.
 Smart Contracts: Enable automated, trustless agreements on
platforms like Ethereum.
 Decentralized Finance (DeFi): Offers financial services like
lending, borrowing, and insurance without intermediaries.
 Non-Fungible Tokens (NFTs): Represent digital ownership of
assets like art, music, and collectibles.
 Gaming and Metaverse: In-game currencies and virtual real
estate powered by crypto.

Advantages of Cryptocurrency

 Faster Transactions: Enables near-instantaneous transfer of

funds across the world.
 Lower Costs: Reduces or eliminates transaction fees.
 Accessibility: Opens financial services to unbanked populations.
 Ownership: Users have full control over their assets.
 Innovation: Encourages development of new financial
technologies.
Challenges and Risks

Despite its potential, cryptocurrency is not without its downsides:

 Volatility: Prices can fluctuate dramatically in short periods.

 Security Risks: Hacking, phishing attacks, and loss of private
keys can lead to loss of funds.
 Lack of Regulation: Inconsistent global regulation creates
uncertainty.
 Illegal Use: Anonymity can be misused for illegal activities like
money laundering.
 Scalability: Some networks face limitations in processing high
volumes of transactions quickly.

Top Cryptocurrencies in India (May 2025)

1. Bitcoin (BTC)

 Price: ₹9,581,944.51 INR

 Market Cap: ₹182.9 Trillion
 24h Change: +0.96%
 Overview: Bitcoin remains the leading cryptocurrency globally
and in India, often considered a store of value and a hedge
against inflation.

2. Ethereum (ETH)

 Price: ₹2,10,106 INR

 Market Cap: ₹322.4 Billion
 24h Change: -6.2%
 Overview: Ethereum is the backbone of decentralized
applications and smart contracts, with Ethereum 2.0 enhancing
scalability and energy efficiency.
3. BNB (Binance Coin)

 Price: ₹55,351 INR

 Market Cap: ₹93.4 Billion
 24h Change: +2.13%
 Overview: BNB is used within the Binance ecosystem, offering
reduced trading fees and participation in token sales.

4. XRP (Ripple)

 Price: ₹2,58 INR

 Market Cap: ₹151.6 Billion
 24h Change: +3.24%
 Overview: XRP facilitates fast and low-cost cross-border
transactions, making it popular among financial institutions.

5. Solana (SOL)

 Price: ₹1,82,950 INR

 Market Cap: ₹95.0 Billion
 24h Change: +6.96%
 Overview: Solana offers high-speed transactions and scalability,
positioning itself as a competitor to Ethereum.

6. Dogecoin (DOGE)

 Price: ₹25 INR

 Market Cap: ₹36.6 Billion
 24h Change: +9.20%
 Overview: Initially started as a meme coin, Dogecoin has
gained popularity due to its active community and celebrity
endorsements.

7. Cardano (ADA)

 Price: ₹83 INR

 Market Cap: ₹29.2 Billion
  24h Change: +4.65%
 Overview: Cardano focuses on security and scalability, aiming
to provide a balanced and sustainable ecosystem for
cryptocurrencies.

8. Polkadot (DOT)

 Price: ₹4,53 INR

 Market Cap: ₹7.18 Billion
 24h Change: +1.71%
 Overview: Polkadot enables different blockchains to transfer
messages and value in a trust-free fashion; seeking to make a
web where our data is our own and isn’t stored on a server
owned by an intermediary company.

9. Uniswap (UNI)

 Price: ₹6,38 INR

 Market Cap: Data not available
 24h Change: +4.93%
 Overview: Uniswap is a decentralized exchange protocol built
on Ethereum, allowing users to swap various tokens directly
from their wallets.

10. Litecoin (LTC)

 Price: ₹95.5 INR

 Market Cap: Data not available
 24h Change: -2.65%
 Overview: Often referred to as the silver to Bitcoin's gold,
Litecoin offers faster transaction times and a different hashing
algorithm.
📊 Comparative Snapshot
Market Cap 24h
Cryptocurrency Price (INR)
(INR) Change

Bitcoin (BTC) ₹9,581,944 ₹182.9 Trillion +0.96%

Ethereum (ETH) ₹2,10,106 ₹322.4 Billion -6.2%

BNB (BNB) ₹55,351 ₹93.4 Billion +2.13%

XRP (Ripple) ₹2,58 ₹151.6 Billion +3.24%

Solana (SOL) ₹1,82,950 ₹95.0 Billion +6.96%

Dogecoin (DOGE) ₹25 ₹36.6 Billion +9.20%

Cardano (ADA) ₹83 ₹29.2 Billion +4.65%

Polkadot (DOT) ₹4,53 ₹7.18 Billion +1.71%

Data not
Uniswap (UNI) ₹6,38 +4.93%
available

Data not
Litecoin (LTC) ₹95.5 -2.65%
available
 CHAPTER : 2

Problem Definition:
Introduction
Cryptocurrency, a form of digital or virtual currency secured by
cryptography, has emerged as a revolutionary financial innovation in
recent years. Since the introduction of Bitcoin in 2009,
cryptocurrencies have evolved into thousands of different coins and
tokens, impacting the way individuals and institutions conduct
transactions, invest, and store value. Unlike traditional currencies
issued by governments, cryptocurrencies operate on decentralized
blockchain technology, promising transparency, security, and
reduced transaction costs. Despite its growing popularity and
potential, cryptocurrency investment remains highly volatile and
speculative, raising concerns among investors, regulators, and
financial experts.

Relevance

In today’s rapidly digitizing world, cryptocurrencies are becoming

increasingly relevant in financial markets and investment portfolios
globally. They present an alternative investment avenue for
individuals and institutional investors seeking diversification beyond
traditional assets like stocks and bonds. Additionally, the growing
acceptance of cryptocurrencies for payments, remittances, and
decentralized finance (DeFi) applications underscores their
relevance. Understanding the dynamics of cryptocurrency markets,
the associated risks, and potential rewards is crucial for investors,
policymakers, and researchers to navigate this evolving landscape
effectively.
Need

The need to study cryptocurrency investment stems from its unique

characteristics, including high price volatility, regulatory uncertainty,
technological complexity, and security challenges such as hacking
and fraud. Many investors lack comprehensive knowledge about
these risks, which can lead to significant financial losses. Moreover,
as cryptocurrencies are relatively new compared to traditional
financial instruments, there is limited research on long-term
investment behavior, market trends, and regulatory impacts. This
creates a demand for systematic investigation into the risks and
rewards associated with cryptocurrency investment to inform better
decision-making and policy formulation.

Objective of Research

The primary objective of this research is to analyze the risks and

rewards associated with investing in cryptocurrencies. Specifically,
the study aims to:

 Examine the factors influencing cryptocurrency price volatility

and market behavior.
 Identify the key risks faced by cryptocurrency investors,
including technological, regulatory, and market-related risks.
 Assess the potential returns and benefits of cryptocurrency
investment compared to traditional assets.
 Explore investor perceptions and behavior towards
cryptocurrencies.
 Provide recommendations for investors and policymakers to
mitigate risks and maximize benefits.
Hypothesis

Based on the above objectives, the research hypothesizes the

following:

 H1: Cryptocurrency investments offer higher potential rewards

but come with significantly higher risks compared to traditional
investment options.
 H2: Investor knowledge and awareness of cryptocurrency risks
directly influence their investment decisions and outcomes.
 H3: Regulatory developments and market news have a
measurable impact on cryptocurrency price volatility.
 H4: Despite high volatility, cryptocurrencies can serve as
effective portfolio diversification tools under certain conditions.
 CHAPTER : 3
Data Collection & Research Methodology
Data Collection & Research Methodology
1. Introduction

The objective of this research is to analyze the risks and rewards

associated with cryptocurrency investments. To achieve this, a
systematic approach to data collection and research methodology
was designed to ensure the reliability, validity, and
comprehensiveness of the findings.

2. Research Design

This study employs a descriptive research design supplemented with

exploratory elements to understand both the quantitative aspects
(such as market volatility and returns) and qualitative factors (like
investor sentiment and regulatory impacts) affecting cryptocurrency
investments.

3. Data Collection Methods

3.1 Primary Data

Primary data was collected through the following:

 Structured Questionnaires: Distributed to individual investors

and financial experts to gather firsthand information about
their experiences, perceptions, and risk appetite related to
cryptocurrency investments.
 Interviews: Semi-structured interviews were conducted with
cryptocurrency traders, financial analysts, and blockchain
 experts to gain deeper insights into market trends, risks, and
rewards.
 Surveys: Online surveys targeted at a broader audience to
collect data on investment behavior and awareness levels.

3.2 Secondary Data

Secondary data was gathered from:

 Cryptocurrency Market Data: Historical price data, market

capitalization, trading volumes, and volatility indices were
obtained from reputed cryptocurrency tracking platforms like
CoinMarketCap, CoinGecko, and CryptoCompare.
 Research Articles and Reports: Academic papers, industry
reports, and whitepapers related to cryptocurrency investment
risks and rewards.
 Regulatory and News Sources: Official government
publications, regulatory announcements, and financial news
portals were reviewed to understand the evolving regulatory
landscape.
 Financial Websites: Data on traditional investment instruments
was collected for comparative analysis.

4. Sampling Technique

A purposive sampling technique was employed to select

respondents who have experience in cryptocurrency investment.
This includes:

 Retail investors actively trading or holding cryptocurrencies

 Financial advisors knowledgeable in digital assets
 Cryptocurrency market analysts

The sample size consisted of 100 respondents to balance the depth

of qualitative insights and the breadth of quantitative data.
5. Data Analysis Tools and Techniques

 Quantitative Analysis:
o Statistical tools such as mean, median, standard
deviation, and variance were used to analyze returns and
volatility.
o Correlation analysis was conducted to understand
relationships between risk factors and returns.
o Regression analysis was applied to study the impact of
variables such as market news, regulations, and investor
sentiment on cryptocurrency prices.
 Qualitative Analysis:
o Content analysis was performed on interview transcripts
to identify recurring themes about risk perception and
investment strategies.
o Sentiment analysis tools were used to gauge investor
mood from social media and news articles.
 Software Tools:
o Microsoft Excel for data tabulation and basic statistics
o SPSS or R for advanced statistical analysis
o NVivo for qualitative data coding and theme extraction

6. Limitations of the Study

 The sample size is relatively small and may not fully represent
the entire investor population.
 Cryptocurrency markets are highly volatile and dynamic,
making it difficult to capture all risk factors at one point in time.
 Self-reported data from questionnaires may be subject to bias.
 Regulatory changes are ongoing, which can rapidly alter the
risk-reward profile of cryptocurrencies.
7. Ethical Considerations

 Participants were informed about the purpose of the research

and assured of the confidentiality of their responses.
 Consent was obtained prior to data collection.
 Data was used strictly for academic purposes and stored
securely.

8. Conclusion

The combination of primary and secondary data sources, supported

by both qualitative and quantitative analysis, provides a
comprehensive framework to study the risks and rewards associated
with cryptocurrency investment. This methodology aims to generate
valid, reliable, and insightful conclusions that can assist investors and
policy makers a like.
SWOT Analysis of Cryptocurrency Investment: Risks
and Rewards
1. Strengths

 High Return Potential:

Cryptocurrencies like Bitcoin and Ethereum have shown
massive returns over the past decade, attracting both retail and
institutional investors.
 Decentralization and Transparency:
Blockchain technology ensures transparent, immutable, and
peer-to-peer transactions without relying on centralized
intermediaries.
 Global Accessibility:
Anyone with internet access can invest in cryptocurrencies,
promoting financial inclusion and bypassing traditional banking
systems.
 Diversification Tool:
Cryptocurrencies offer an alternative asset class that can
diversify an investment portfolio beyond traditional stocks and
bonds.
 Innovation and Adoption:
Increasing adoption of cryptocurrencies for payments, smart
contracts, NFTs, and DeFi applications indicates future growth
and utility.

2. Weaknesses

 High Volatility:
Cryptocurrency prices are highly volatile, often experiencing
large swings in short periods, making them risky for
conservative investors.
 Regulatory Uncertainty:
Lack of clear regulations or changing policies in different
 countries create legal and tax uncertainties for investors and
exchanges.
 Lack of Fundamental Valuation Models:
Unlike traditional assets, cryptocurrencies often lack intrinsic
valuation methods, making price discovery difficult.
 Security Risks:
Risks of hacking, phishing attacks, and loss of private keys are
significant concerns for investors, especially in unregulated
exchanges.
 Limited Real-world Use Cases:
Despite the hype, mass adoption in daily transactions is still
limited compared to fiat currencies.

3. Opportunities

 Mainstream Acceptance:
Growing interest from institutions like banks, hedge funds, and
tech companies increases credibility and drives wider adoption.
 Technological Advancement:
Developments in blockchain scalability (e.g., Ethereum 2.0,
Layer 2 solutions) could lead to faster and cheaper
transactions, boosting usability.
 Integration with Traditional Finance:
Emergence of crypto ETFs, custodial services, and regulated
exchanges may bridge the gap between traditional finance and
crypto.
 Growing Markets in Developing Countries:
In countries with unstable currencies or limited banking
infrastructure, cryptocurrencies offer a reliable store of value
and payment method.
 Decentralized Finance (DeFi) Growth:
DeFi platforms enable lending, borrowing, and trading without
intermediaries, creating new financial opportunities for
investors.
4. Threats

 Government Bans and Regulation:

Crackdowns on crypto mining and trading (e.g., China’s ban)
pose existential threats to the market in certain regions.
 Market Manipulation:
Lack of regulation opens the door to pump-and-dump schemes,
wash trading, and price manipulation.
 Environmental Concerns:
Proof-of-Work cryptocurrencies (like Bitcoin) consume large
amounts of energy, drawing criticism and risking regulatory
backlash.
 Cybersecurity Threats:
Theft from exchanges and DeFi platforms, smart contract bugs,
and rug pulls pose ongoing risks to investor funds.
 Technological Obsolescence:
Rapid evolution in technology could make current crypto
protocols outdated, affecting the value of investments.
Benefits and Criticism of Cryptocurrency Investment
A. Benefits of Cryptocurrency Investment
1. High Return Potential

Many cryptocurrencies, especially early investments in Bitcoin,

Ethereum, and other altcoins, have provided substantial returns to
investors. This high upside attracts both retail and institutional
interest.

2. Decentralization and Independence from Traditional

Systems

Cryptocurrencies operate on decentralized blockchain networks,

reducing dependency on banks and centralized financial institutions.
This empowers users with full control over their assets.

3. Lower Transaction Costs

Compared to traditional banking systems, especially for cross-border

transfers, cryptocurrencies often have lower fees and faster
transaction processing.

4. Accessibility and Inclusion

Cryptocurrency markets are open 24/7 and accessible globally with

just an internet connection. This helps unbanked populations access
financial services without needing traditional banking infrastructure.

5. Transparency and Security

Blockchain ledgers are transparent and immutable. Transactions are

recorded publicly and cannot be altered, increasing trust and
reducing fraud risks.
6. Portfolio Diversification

Adding cryptocurrencies to an investment portfolio provides

exposure to a new asset class that behaves differently than stocks,
bonds, or commodities.

7. Innovation and Utility

Emerging technologies like NFTs, DeFi (Decentralized Finance), and

smart contracts expand the real-world use cases and investment
opportunities in crypto.

B. Criticism of Cryptocurrency Investment

1. Extreme Volatility

Crypto markets are known for large price swings. This volatility can
result in significant short-term losses and may not be suitable for
risk-averse investors.

2. Regulatory Uncertainty

Governments around the world have different and often changing

stances on cryptocurrencies. Lack of regulatory clarity creates
confusion for investors and developers.

3. Security Risks and Scams

While the blockchain itself is secure, exchanges and wallets are

vulnerable to hacking. Phishing, rug pulls, and Ponzi schemes have
caused many investors to lose funds.
4. Environmental Concerns

Cryptocurrencies that use proof-of-work consensus mechanisms (like

Bitcoin) consume large amounts of electricity, raising environmental
sustainability concerns.

5. Lack of Consumer Protections

Unlike bank accounts, crypto holdings are not insured or protected.

Once lost (e.g., due to forgotten private keys), funds cannot be
recovered.

6. Speculative Nature

A large portion of cryptocurrency investment is driven by hype,

speculation, and fear of missing out (FOMO), rather than
fundamental value or utility.

7. Limited Real-World Adoption

Despite increasing popularity, real-world usage of cryptocurrencies

for everyday transactions is still limited. Many merchants do not
accept them, and transaction times or fees can be barriers.
 CHAPTER: 6

CRYPTOCURRENCY IN INDIA
Cryptocurrency in India
1. Introduction

Cryptocurrencies, especially Bitcoin and Ethereum, have gained

significant attention in India over the past decade. While the global
market for digital currencies is expanding rapidly, India's journey has
been marked by regulatory ambiguity, cautious interest, and growing
public participation. Despite the absence of a clear legal framework,
Indian investors have shown strong enthusiasm for cryptocurrency
trading, leading to widespread adoption and debate around its
economic implications.

2. Timeline of RBI and Cryptocurrency (Key Events)

Year Event

RBI issues its first cautionary notice against the use of virtual
2013
currencies, warning users of financial and security risks.

Cryptocurrencies gain popularity in India; RBI reiterates its

2017
warning, while the Indian government considers regulations.

RBI issues a circular prohibiting banks and financial

2018 institutions from dealing in cryptocurrencies. This severely
hampers exchange operations in India.

The Indian government proposes a draft bill: “Banning of

2019 Cryptocurrency and Regulation of Official Digital Currency
Bill”, recommending a complete ban.

March The Supreme Court of India overturns RBI’s 2018 circular,

2020 stating it was unconstitutional. This revives crypto
 Year Event

operations in the country.

Government signals intention to regulate rather than ban

2021 cryptocurrencies. Discussions on creating a CBDC (Central
Bank Digital Currency) begin.

Introduction of 30% tax on crypto profits and 1% TDS on

2022 transactions in the Union Budget. No ban, but crypto is not
recognized as legal tender.

RBI launches pilot versions of the Digital Rupee (CBDC) for

2023–
retail and wholesale use. Crypto continues to operate under
2024
limited regulations.

3. Laws Related to Cryptocurrency in India

a. No Legal Tender Status

 Cryptocurrencies are not recognized as legal tender in India,

meaning they cannot be used for official transactions like fiat
currency.

b. Taxation Framework

 30% flat tax on profits from digital assets (introduced in 2022).

 1% TDS (Tax Deducted at Source) on every crypto transaction
above a certain threshold.
 No provision for setting off losses from other income heads.

c. RBI and SEBI Oversight

 RBI regulates the financial impact and is developing the Digital

Rupee.
  SEBI (Securities and Exchange Board of India) may regulate
crypto exchanges in future, especially regarding investor
protection.

d. Foreign Exchange and Money Laundering Laws

 Under FEMA (Foreign Exchange Management Act) and PMLA

(Prevention of Money Laundering Act), certain crypto
transactions may be monitored or flagged.

e. Crypto Bill (Pending Legislation)

 The Cryptocurrency and Regulation of Official Digital Currency

Bill remains under review. It proposes distinguishing between
utility-based crypto and speculative tokens.

4. Impact on the Indian Economy

a. Increased Investment and Financial Inclusion

 Millions of Indians, especially youth, are participating in crypto

trading, leading to financial inclusion and awareness of
alternative assets.

b. Job Creation and Startups

 Rapid rise in blockchain startups, crypto exchanges (e.g.,

CoinDCX, WazirX), and demand for Web3 developers and
crypto analysts.

c. Capital Outflows and Tax Revenues

 Cryptocurrency enables cross-border transactions and may

cause capital outflows if not regulated properly.
 The taxation regime has started contributing to government
revenues, despite the informal nature of the industry.
d. Risk to Financial Stability

 Volatile markets and lack of investor protection pose a

systemic risk to financial stability, especially if leveraged
trading is involved.

e. Push Toward Digital Currency

 With the rise of cryptocurrencies, RBI has accelerated efforts to

launch the Digital Rupee (CBDC) to provide a regulated digital
alternative.