CRYPTOCURRENCY

A Technical Seminar Report submitted in partial fulfillment

for the award of the degree of

BACHELOR OF TECHNOLOGY

IN
COMPUTER SCIENCE AND ENGINEERING (DATA SCIENCE)
(2021-2025)

Submitted by

KOVILAPU BHARAT KUMAR 21X01A6737

Under the esteemed guidance of

Mrs.M.Anitha Rani, M.Tech

Assistant Professor

Department of Computer Science And Engineering(Data Science)

www.nrcmec.org
2021-2025

Signature of Supervisor Signature of H.O.D

 School of Computer Science and Engineering

CERTIFICATE

This is to certify that the Technical Seminar report entitled

“Cryptocurrency” is the bonafide work done by Kovilapu Bharat Kumar,
21X01A6737, in partial fulfillment of the requirements for the award of the degree of
Bachelor of Technology in Computer Science and Engineering (Data Science), from
Jawaharlal Nehru Technological University Hyderabad, during the year 2021-2025.

Project Guide Head of the Department

Mrs. M. Anitha Rani, M. Tech Dr. G. Ramu
Assistant Professor Professor & Head
School of Computer Science and Engineering, School of Computer Science and Engineering,
Narsimha Reddy Engineering College Narsimha Reddy Engineering College
Maisammaguda, Kompally, Secunderabad Maisammaguda, Kompally, Secunderabad
 DECLARATION

I the undersigned MR.VERMA GAURAV PRADEEP MANJU here by declare, that the
work embodied in this Project work titled “CRYPTOCURRENCY – IT’S IMPACT ON
INDIAN ECONOMY”, forms
my own contribution to the research work carried out under the guidance of PROF.
DURGESH KENKRE is a result of my own research work and his not being previously
submitted to any other University for any other Degree
/Diploma to this or any other University.

Wherever reference has been made to previous work of other, it has been clearly indicated as
such and included in the bibliography.

I, here by further declare that all information of this document has been obtained and
presented in accordance with academic rules and ethical conduct.

Signature
VERMA GAURAV PRADEEP MANJU

Certified by
PROF. DURGESH KENKRE
 ACKNOWLEDGEMENT

To list to who all helped me is difficult because they are so numerous and the depth is so
enormous.

I would like to acknowledge the following as being idealistic channel and fresh dimension in
the completion of project.

I take this opportunity to thank the University of Mumbai for giving me chance to do the
project.

I would like to thank my Principal, Dr. N.N. Pandey for providing the necessary facilities
required for completion of this project.

I take this opportunity to thank towards My Co-Ordinator and My Project Guide, Prof.
Durgesh Kenkre for his moral support and guidance.

I would like to thank My College Library for having provided various reference books and
magazines related to my project.

Lastly I would like to thank each and every person directly or indirectly helped me in the
completion of the project, especially My Parents And My Peers who supported me through
out of my project.

VERMA GAURAV PRADEEP MANJU

 INDEX

Chapter No. Title Page No.

1 Introduction to Cryptocurrency 1

2 Regulations and Legalization 10

3 Types of cryptocurrency 13

4 Advantages and disadvantages 15

5 Cryptocurrency impact on Indian economy 17

6 News Article 31

7 Conclusion 35
Cryptocurrency

1- INTRODUCTION TO CRYTOCURRENCY
1.1 General Introduction

Cryptocurrency is a digital asset designed as a medium of exchange. It uses cryptography to

secure transactions, manage new units, and verify asset transfers. Unlike traditional money,
which is controlled by central banks, cryptocurrencies operate through decentralized systems,
usually via blockchain technology.

The first and most well-known cryptocurrency, Bitcoin, was created by the unknown Satoshi
Nakamoto. Satoshi’s breakthrough was developing a decentralized cash system, solving a
problem that plagued earlier attempts at digital money.

Cryptocurrencies are faster, cheaper, and more secure than traditional currencies. They allow
users to transact directly without intermediaries, reducing costs and speeding up transactions.
Every user can verify their own transactions and those of others through a public ledger,
ensuring transparency and efficiency.

A unique aspect of cryptocurrencies is their "Trustless" nature, meaning users don't need to
rely on third parties to verify funds. Transactions are visible on the public ledger, ensuring
security without the need for trust between parties.

School of Computer Science and Engineering, NRCM 1

Cryptocurrency

The study examines various cryptocurrencies and their potential as an emerging market that could
challenge, and potentially disrupt, the financial systems of today and the future. It highlights the
significance of cryptocurrencies, Initial Coin Offerings (ICOs), the mining process, different mining
devices, market movements, and technical and case study analyses.

In contrast to traditional financial systems where transactions are reversible (e.g., credit card disputes
where funds can be recovered after an investigation), cryptocurrencies like Bitcoin are decentralized
and often pseudo-anonymous, which introduces unique challenges. One key issue is security:
Bitcoin's decentralized nature makes it a major target for hackers because stolen funds are difficult to
recover.

Dr. Ruja Ignatova, CEO of OneCoin, has addressed these security concerns by introducing identity
verification within OneCoin's cryptocurrency system. OneCoin’s Know Your Customer (KYC) policy
requires users to verify their identities with documentation, ensuring transparency and reducing fraud.
This has helped foster trust and accelerated OneCoin's adoption. If successful, some speculate that
OneCoin could emerge as the next Bitcoin.

Cryptocurrency mining, which involves verifying transactions and adding them to a blockchain
ledger, has also grown significantly. Known as altcoin or Bitcoin mining, this process has become a
crucial part of the cryptocurrency ecosystem as digital currency usage has surged in recent years.

School of Computer Science and Engineering, NRCM 2

Cryptocurrency

Cryptocurrency mining is painstaking, costly and only sporadically rewarding. Nonetheless,

mining has a magnetic appeal for many investors interested in cryptocurrency because of the
fact that miners are rewarded for their work with crypto tokens. This may be because
entrepreneurial types see mining as pennies from heaven, like California gold prospectors in
1849. And if you are technologically inclined, why not do it?

However, before you invest the time and equipment, read this explainer to see whether mining
is really for you. We will focus primarily on Bitcoin (throughout, we'll use "Bitcoin" when
referring to the network or the cryptocurrency as a concept, and "bitcoin" when we're
referring to a quantity of individual tokens).

The primary draw for many Bitcoin miners is the prospect of being rewarded with valuable
bitcoin tokens. That said, you certainly don't have to be a miner to own cryptocurrency
tokens. You can also buy cryptocurrencies using fiat currency; you can trade it on an
exchange like Bitstamp using another crypto (as an example, using Ethereum or NEO to buy
bitcoin); you even can earn it by playing video games or by publishing blog posts on
platforms that pay users in cryptocurrency. An example of the latter is Steemit, which is kind
of like Medium except that users can reward bloggers by paying them in a proprietary
cryptocurrency called STEEM. STEEM can then be traded elsewhere for bitcoin.

The bitcoin reward that miners receive is an incentive which motivates people to assist in the
primary purpose of mining: to support, legitimize and monitor the Bitcoin network and its
blockchain. Because these responsibilities are spread among many users all over the world,
bitcoin is said to be a "decentralized" cryptocurrency, or one that does not rely on a central
bank or government to oversee its regulation.

“Virtual currencies, perhaps most notably Bitcoin, have captured

the imagination of some, struck fear among others, and confused the
heck out of the rest of us.” – Thomas Carper, US-Senator.

School of Computer Science and Engineering, NRCM 3

Cryptocurrency

1.2 Evolution Of Crytocurrency

In 1990, Digital Cash became a popular topic in cryptography circles. The first decentralized
Cryptocurrency namely bitcoin was created in 2009 by pseudonymous crazy software
developer Satoshi Nakamoto, who however solved the double spending problem without
trusting any third party. Mark Millar, an American computer scientist, Adam Back, a British
cryptographer and crypto-hacker, David Chaum, computer scientist and cryptographer, Stefan
Brands who sold his U-prove technology to Microsoft and Japanese cryptographers were few
of the initial individuals who ought to be strong in their belief that cryptocurrencies have the
potential to transform the payment system all over the world which is fully decentralized.

Back in 1998, an electronic cash system was published by Wei Dai called b-money.
NickSzabo, computer scientist and a legal scholar created an electronic currency system, the
currently recognized in the name of cryptocurrency "Bit Gold” that required users to complete
proof of work function showing solutions, being cryptographically put together and later on
published. Another currency system that showing reusable proof of work, also known as
RPOW as its abbreviation, say for instance, Gold coin's value is observed to be underpinned
by raw gold’s value for it to be made, similarly, the value of an RPOW token is guaranteed by
the value of the real-world resources that is required to 'mint' the POW token. Finney's
version of RPOW, shows the token to be a piece of Hashcash that is a POWS in order to limit
spam emails or junk emails and denial of service attacks, and more recently be recognized for
its use in bitcoin and other cryptocurrencies as part of mining algorithm that was put forward
by Hal Finney who was inspired by the work of Dai and Szabo.

The first decentralized cryptocurrency was bitcoin that was created in 2009 by
SatoshiNakamoto. He used SHA-256, a sub part of SHA-2 that is a secure hash algorithm that
states a set of cryptographic hash function having special class codes used in creation of
cryptography, which is a technique for secure communication tin a way where two entities
communicate without any interference of any third party in an unsusceptible way.
Cryptography is a standard secrecy method that protects the contents of the message from
being disclosed to unauthorized users who may access or detect the communication that can
be prevented by cover communication that conceals the existence of the communication.
These unauthorized users can be third parties like adversaries which are any malicious entity
that prevents the users of the cryptosystem from achieving their goal such as primarily
privacy, integrity, and availability of data, discovery of secret data, corrupting data in the
system, spoofing the identity of a message sender and receiver, forcing system downtime.

School of Computer Science and Engineering, NRCM 4

Cryptocurrency

They are mathematical algorithms, specially designed by the US National Security Agency.
Cryptographic hash functions are all those mathematical operations that run on digital data,
connoted when compared with the computed "hash" which is the output from execution of
different algorithms, to an expectedly known hash value, by which a person can determine the
data's integrity. Just like computing the hash of a downloaded file after which we compare the
result to a previously published hash result that indicate whether or not the download has been
modified or tampered with, another key aspect of cryptographic hash function is their
collision resistance where in no user shall be able to find two different input values that result
in the same hash output to be known as a cryptographic hash function, as its POWS.

In April 2011, Name-coin denoted by ℕ or NMC one of the newly invented cryptocurrency
and the first fork of the bitcoin software. It is based on the code of bitcoin and uses the same
POW algorithm. It is limited to 21 million coins. Soon after that, In October 2011, litecoin
was released, which is comparatively better in technical improvements than bitcoins. It was
the very first successful cryptocurrency thatused script, which is a password-based key
derivation function mainly consisting of one or more secret keys from a secret value like a
master key that is nothing but a password, created for a security software called Tarsnap that
encrypts and stores data as it is an online backup service, also used by amazon. The algorithm
was especially designed so as to make it costly enough to perform large-scale custom
hardware attacks that requires multiple computation where typically trying one key and
checking if the resulting decryption gives a meaningful answer after which, trying the next
key if it does not by requiring large amounts of memory as its hash function instead of SHA-
256.

Peer coin, also one of the initially cyptocurrencies was the first to use a proof-of work/Proof-
of-stake hybrid which does not have a hard limit on total number of coins as it is designed to
attain an annual inflation rate of 1%. IOTA was the first cryptocurrency that is based on
Tangle and not blocks chains. Many other cryptocurrencies are created except the ones where
few have been successful because it’s just the beginning to the era of cryptocurrencies.

While 2017 saw massive spikes in the value of cryptocurrencies, they’re still not entering our
day-to-day lives. Most of those who own substantial amounts of bitcoin are doing so as an
investment, rather than looking to utilise cryptocurrency as a new way to buy things. That’s
not to say that you can’t buy things with Bitcoin, in December 2013 a Tesla Model S was
bought for 91.4 bitcoins and Starbucks are currently letting customers use the cryptocurrency
to purchase food and drink from them.

School of Computer Science and Engineering, NRCM 5

Cryptocurrency

1.3 Objectives of Crytocurrency

1. Low-cost money transfers
The most well-known benefit of cryptocurrencies is their ability to send and receive payments at a
low cost and at a high speed. The low fees associated with transactions using digital
currencies such as litecoin (LTC), stellar (XLM) or bitcoin cash (BCH) make them excellent
payment systems for international money transfers

Example, a recent $99 million litecoin (LTC) transaction took only two and a half minutes to
process and cost the sender only $0.40 in transaction fees.

2. A censorship-resistant alternative store of wealth

While you probably don’t think your bank account and assets could be frozen, the reality is
that this occurs more often than people realise — especially in jurisdictions with dubious rule
of law. This is where one of the most unique and powerful uses of crypto comes into play.
Cryptocurrencies, such as bitcoin, act as a censorship-resistant alternative store of wealth that
only the individual with the private keys to the wallet has access to. Hence, no personal bitcoin
wallet can ever be frozen by the authorities.

3. Invest in innovative early-stage startups

The emergence of digital token-based fundraising has allowed anyone with an Internet connection
to become an investor in innovative early-stage tech startups, while at the same time providing
new startup ventures with much-needed seed capital.

Initial coin offerings (ICOs) are a new form of fundraising that provides startups with the
opportunity to raise capital by selling a newly-created digital token to early backers of the
project in exchange for established cryptocurrencies such as bitcoin (BTC) or ether (ETH).
The price of the newly-issued token then acts as proxy linked to the success or failure of said
startup once it starts to trade in the secondary market.

4. Make private transactions

Privacy-centric digital currrencies such as Monero (XMR), Zcash (ZEC), and PIVX (PIVX)
enable users to make anonymous financial transactions.That means individuals can make money
transfers without having to explain to a bank why they are sending a large sum of money, what
the sources of the funds are and who they are sending it to, which can delay the transaction
and involve unnecessarily bureaucratic processes.

5. Send non-cash remittances

Another powerful use case for cryptocurrencies is non-cash remittances. Nigerian blockchain

School of Computer Science and Engineering, NRCM 6

Cryptocurrency

startup SureRemit, enables its users to send non-cash remittances from anywhere in the world to
selected African nations.
SureRemit raised $7 million during its initial coin offering in December 2017 and plans on using
this money to improve its platform and expand into new markets.

6. Get paid to post content

The world’s first incentivized social media and blogging platform, ‘Steemit’, enables publishers
to receive financial rewards in the form of cryptocurrency for posting content and for curating on
the network by upvoting high-quality content. ‘Steemit’ financially empowers its users by
rewarding them for contributing to the platform as opposed to taking its users data and selling
it to third- parties like Facebook does. For this reason, Steemit has become particularly popular
in emerging markets where it boasts a high number of users.

7. Rent out your spare hard drive space to the cloud

Decentralized blockchain-based cloud storage solutions such as Storj enable users to earn
cryptocurrency in exchange for renting out their hard drive storage space to those who need it on a
peer-to-peer basis.“Storj can be faster, cheaper, and more secure than traditional cloud storage
platforms. Faster because multiple machines are serving you your file simultaneously, cheaper
because you are renting people's spare hard-drive space instead of paying for a purpose-built
data center, and more secure because your file is both encrypted and shredded. There is no need to
trust a corporation, vulnerable servers, or employees with your files. Storj completely removes
trust from the equation.

8. Travel the world

Due to the explosive growth of the cryptocurrency ecosystem in the past few years, it is now
possible to travel the world by spending cryptocurrency. Established travel agents such
as CheapAir and Destinia accept bitcoin as a payment method to book flights, car rentals, and
hotels and for those who prefer to stay in an apartment when traveling can book
accommodation using bitcoin (BTC) or ether (ETH)

9. Travel into space

Richard Branson’s commercial space travel company, Virgin Galactic, announced in
November 2013 that they are accepting bitcoin payments for space travel bookings. While the
California- based company has not yet managed to successfully launch a commercial space
flight, several future astronauts have already paid for their tickets — worth $250,000 — in
bitcoin, including bitcoin advocates Cameron and Tyler Winklevoss.

School of Computer Science and Engineering, NRCM 7

Cryptocurrency

10. Buy a lambo

Now you can also use your cryptocurrency to buy a Lamborghini. The bitcoin luxury
marketplace ‘De Louvois’ enables the “crypto rich” to purchase sports cars including the
cryptocurrency community’s favorite status symbol, the Lamborghini, using bitcoin.The
marketplace also offers a range of other luxury goods such as art, fine wines, and real estate
for those whose digital pockets are deep enough.

1.4 Importance of Cryptocurrency

1. Safest Currency
Cryptocurrency is one of the safest and trusted kinds of digital currency that people prefer
nowadays. In a world where there is an abundance of conmen and looters, we all need to trade
in the safest possible ways. Cryptocurrencies give us that assurance which makes them an
important source of investment right now and in the future as well.

2. Anywhere access
Another reason why cryptocurrencies have become extremely in demand is because of their
policies. You don’t really need to deal with a third party when it comes to cryptocurrency.
This gives people a reassurance and a feeling of safety. The fact that cryptocurrencies are
digital currencies alleviates the need for a third party. You can transact no matter where you
are situated at.

3. Low cost Transaction

Cryptocurrency is a low-cost means of transaction. You don’t need to shell out money in
order to exchange digital currencies. All you need in order to be able to transact is your cell
phone and a basic knowledge of cryptocurrencies.

4. No extra cost
Most of the digital currencies have to pay for transactions. In the case of cryptocurrencies,
you don’t really need to pay for the transactions. The reason is that the people who mine the
cryptocurrencies; called as miners get their compensation from the network itself.

5. Wallet Friendly
You can store your cryptocurrencies in a safe wallet. Cryptocurrencies give you the option of
storing your money in two kinds of wallets which can easily be transferred to your account.
And the wallets don’t have any charges in order to be able to store your digital currencies.

School of Computer Science and Engineering, NRCM 8

Cryptocurrency

6. Highly confidential data

For most people, privacy is the top-most priority. When dealing in cryptocurrencies, you can
expect your transactions to be highly confidential. You can carry out your transactions and be
anonymous.

7. One can buy in fraction

The amount of money that you want to invest is totally up to Cryptocurrencies give you the
liberty of buying them in fractions as well. If you feel like one bitcoin is too much, you can
split it and buy half or one-third of it. This reduces the cost for you and does not require you
to spend out of bounds. Using a crypto converter, you can find out the price of any
cryptocurrency in your country’s currency and invest accordingly.

8. No Need to Share confidential details while doing Transaction

Since the senders and recipients of cryptocurrencies don’t directly transfer any money to the
credit cards, you don’t have to share your credentials with anyone. This helps you in avoiding
identity theft. You decide what information you want to share with the merchant if anything
at all makes you doubtful.

9. No Middleman
You get complete autonomy that you look for. When it comes to cryptocurrencies, there is no
third party involved to demand for any fee or money. You are the only person who is
managing your account.

School of Computer Science and Engineering, NRCM 9

Cryptocurrency

2 - REGULATIONS AND LEGALIZATION

2.1 Regulations.

The financial system of India is framed in such a way where we have as many rules and
regulations than any other country in the world. RBI regulates the Indian banking system and
the debt market, that is all the commercial banks, SEBI regulates all the stock exchanges, we
neither do have any regulatory system for cryptocurrencies nor any uniform international
legal law covering the use of bitcoin but very few countries do have set up their own
regulators for cryptocurrencies like United states and Russia, have started to trade
cryptocurrencies officially. Many countries have legalized it but a particular separate
exchange has specifically been created only by these two countries. Bitcoin has been famous
post 2009, a peer-to-peer digital currency in the new era ofcryptocurrency. But today, more
than 500 different cryptocurrencies exist, but Bitcoin still enjoys the first mover advantage
over other businesses as its being introduced for the first time in the market. Since authorities,
enforcement agencies, and regulators are constantly exploring the phenomena, one pertinent
question yet remains whether bitcoin is legal or illegal. The answer doesn’t only depend on
the location and activity of the user, but also with accordance to market capitalization.
Bitcoins are neither issued, endorsed, nor regulated by central bank but are created through an
automated programmed computer generated process called mining. Cryptocurrencies are not
related to any government, Bitcoin is a peer-to-peer payment system as well as scan be stored
in physical form, having a limitation of just 21 million bitcoins to be in circulation in physical
form, currently present in bitcoin ATMs and can even be exchanged and traded online on
ask/bid price as well as market price. It offers a pretty convenient way to conduct cross-border
transactions with no exchange rate fees but minimum commission fees like transaction fee or
fee in the form of bits irrespective of the volume of bitcoin or bits one is holding. It allows
users to remain anonymous. Consumers have greater ability to purchase goods and services
with bitcoins via onlineretailers, also using bitcoin-purchased gift cards at bricks and mortar
stores. Many Companies have invested in this virtual currency and ventures related to it that
portray a technically well-established virtual currency system.

2.2 Legalization.

 Legal in Nigeria as a committee is set up by the Central Bank of Nigeria (CBN) andNigeria
Deposit Insurance Corporation (NDIC) to look into the possibility of thecountry adopting
the technology of cryptocurrencies. The committee submitted itsreport except few sub-
committees that are yet working towards its regulatory aspect.

School of Computer Science and Engineering, NRCM 10

Cryptocurrency

 Legal in South Africa as in December 2014, Reserve Bank of South Africa issued
aposition paper on Virtual Currencies that declared, virtual currency having neither
anylegal status nor any regulatory framework. Legal in Zimbabwe but The Reserve Bank
of Zimbabwe is doubtful about bitcoin andhas not officially permitted its use. On 5 April
2017 however, BitMari, a PanAfricanBlock chain platform got licensed, through its
banking partner, AgriBank, to operatein the country.
 Legal in Canada as Bitcoin is classified as per current provisions of the Personal Property
Security Act simply as an "intangible”.It is regulated under anti-money laundering and
counter-terrorist financing laws inCanada, based on a federal budget bill (C-31), passed in
2014. Regulations must beenacted before this provision becomes active, however, once
they are it is expectedthat "dealers in digital currency" will be regulated as money services
businesses. TheAuthority des Marches Financiers, the regulator in the province of Quebec,
hasdeclared that some bitcoin related business models including exchanges and ATMsare
regulated under its current MSB Act.
 Legal in Mexico under fintech law.
 Legal in United States as a convertible decentralized virtual currency and as per IRS,it is
taxed as a property. In September 2016, a federal judge ruled “Bitcoins arefunds” within
the plain meaning of that term.

2.3 Countries which obey

School of Computer Science and Engineering, NRCM 11

Cryptocurrency

3- TYPES OF CRYTOCURRENCY

3.1 Below Are Some Notable Cryptocurrencies:

Litecoin

Peercoin

Ripple

School of Computer Science and Engineering, NRCM 12

Cryptocurrency

Monero

School of Computer Science and Engineering, NRCM 13

Cryptocurrency

School of Computer Science and Engineering, NRCM 14

Cryptocurrency

4 - ADVANTAGES & DISADVANTAGES

4.1 Advantages of Crytocurrency

 Decentralization: Cryptocurrencies operate on decentralized networks, typically using

blockchain technology, eliminating the need for intermediaries like banks or governments.
This reduces control by centralized authorities.

 Security: Transactions are secured using cryptography, making them difficult to alter or
counterfeit. Public ledgers (like blockchain) ensure transparency and prevent fraud.

 Lower Transaction Costs: Without intermediaries, fees associated with cryptocurrency

transactions are generally lower than those for traditional banking systems, especially for
international transfers.

 Faster Transactions: Cryptocurrency transactions, especially across borders, are faster

than traditional methods such as bank transfers or wire services, which can take days.

 Global Access: Cryptocurrencies allow anyone with internet access to participate in the
financial system, providing access to banking services for those in underbanked or unbanked
regions.

 Privacy and Anonymity: Some cryptocurrencies, like Monero and Zcash, are designed to
prioritize privacy, allowing users to maintain anonymity in their transactions if desired.

 Transparency: The use of public ledgers means that all cryptocurrency transactions are
recorded and can be viewed by anyone, which increases accountability.

 Ownership and Control: Cryptocurrencies give users full ownership and control over
their assets, without reliance on intermediaries like banks.

 Innovation and Investment Opportunities: Cryptocurrencies and blockchain technology

have opened doors to new innovations, including decentralized finance (DeFi), non-fungible
tokens (NFTs), and smart contracts, offering new ways to invest and participate in the
economy.

 Hedge Against Inflation: Some view cryptocurrencies, particularly Bitcoin, as a hedge

against inflation, as many cryptocurrencies have limited supply and are not controlled by any
central authority.

School of Computer Science and Engineering, NRCM 15

Cryptocurrency

4.2 Disadvantages of Crytocurrency

 Volatility: Cryptocurrencies are known for their extreme price fluctuations, which can
result in significant financial loss or gain within short periods. This volatility makes them
risky for investors and unsuitable for stable transactions.

 Lack of Regulation: Cryptocurrencies operate in a largely unregulated space. This can

lead to issues with fraud, market manipulation, and lack of consumer protection in case of
theft or fraud.

 Security Risks: While blockchain technology is secure, cryptocurrency exchanges and

wallets can be vulnerable to hacking. Once stolen, cryptocurrencies are often impossible to
recover due to the decentralized nature of the system.

 Scalability Issues: Many cryptocurrencies, including Bitcoin, struggle with scalability, as

their networks can handle only a limited number of transactions per second, leading to slow
processing times and high fees during peak usage.

 Illegal Activities: The pseudo-anonymous nature of cryptocurrencies has made them

attractive for illegal activities such as money laundering, drug trafficking, and ransomware
attacks, as transactions can be difficult to trace.

 Limited Adoption: Despite growing awareness, cryptocurrencies have limited acceptance

as a medium of exchange. Many merchants and institutions still do not accept cryptocurrency
payments, limiting its practical use.

 Environmental Impact: The mining process, particularly for cryptocurrencies like

Bitcoin, consumes significant amounts of electricity, leading to concerns over the
environmental impact, especially when mining operations are powered by non-renewable
energy sources.

 Irreversibility of Transactions: Cryptocurrency transactions are irreversible, meaning

once funds are sent, they cannot be recovered if sent to the wrong address or in case of fraud,
unless the recipient willingly returns them.

 Learning Curve: Cryptocurrencies and blockchain technology are complex, making it

difficult for new users to understand how they work. This lack of understanding can lead to
mistakes or loss of funds.

 Potential for Market Manipulation: Since the cryptocurrency market is relatively new
and less regulated than traditional financial markets, it is vulnerable to manipulation by large
holders ("whales") and other bad actors.

School of Computer Science and Engineering, NRCM 16

Cryptocurrency

5 – CRYTOCURRENCY IMPACT ON ECONOMY

The Indian economy is experiencing severe economic slowdown not seen in many years, and
cryptocurrency can potentially help. However, the government is considering a draft bill to
ban cryptocurrencies, which could have undesirable consequences on the economy.
Meanwhile, the Indian crypto community has already been enduring a banking ban by the
central bank. Crypto Can Boost Indian Economy - How Banning Will Hurt it.

5.1 Job Growth Amid ‘Unprecedented’ Economic Slowdown:

Rajiv Kumar, the vice-chairman of Indian policy think tank Niti Aayog, said last week that
the Indian government is facing “an unprecedented situation.” He explained that “In the last
70 years, nobody had faced this sort of situation where the entire financial system is under
threat.” According to Reuters, economists predicted earlier this week that, in the second
quarter of this year, the Indian economy likely expanded at its slowest pace in more than five
years.

The slowdown has led to

many job losses in a
number of sectors,
particularly the auto
industry. Chief Minister of
the Indian state of
Rajasthan, Ashok Gehlot,
informed the press last
week that almost all
sectors in the country are
struggling, with lakhs

School of Computer Science and Engineering, NRCM 17

Cryptocurrency

blockchain and bitcoin has grown 90% over a one-year period ending February. Earlier this
year, the company revealed that Bengaluru was the number one city in India for crypto jobs,
followed by Pune, the second-largest city in the Indian state of Maharashtra.

5.2 Wealth Creation and Helping the Unbanked

Besides job creation, there are other benefits crypto can offer the Indian economy. Among
them is attracting “new foreign venture capital investments into Indian startups,” Shetty
detailed, telling news.Bitcoin.com that “ICOs can be a new global fundraising mechanism for
early-stage Indian startup.” According to ICO data, the total amount of funds raised globally
in ICOs so far this year is over $346 million.

The Waxirx CEO added that cryptocurrency can help make remittances in India “cheaper and
faster.” Data from Trading Economics shows that remittances in India stood at $12.6 billion
in the first quarter. He
also believes that
cryptocurrency can offer
the “Opportunity to bank
the massive 300M+
unbanked people in
India.” The Indian
government’s own data
shows that, as of Feb. 13,
the number of accounts
opened under the
PMJDY, the government-
run financial inclusion
program, was 34.43
crores.

Barchha, however, has doubts about how much cryptocurrency can help the Indian economy.
He argued that “most of the people around the world still understand crypto as money for
illegal activities,” so “It is a distant dream to see crypto helping [the] vast size of Indian
economy.” He opined, “I personally don’t see crypto playing any leadership role in the Indian
economy, not in coming 5 years at least.”

School of Computer Science and Engineering, NRCM 18

Cryptocurrency

5.3 Negative Effects of Banning Crypto

Currently, the Indian government is deliberating on a draft bill to ban cryptocurrencies. It was
drafted by an interministerial committee (IMC) headed by former Secretary of the Department
of Economic Affairs Subhash Chandra Garg, who was recently reassigned to the Power
Ministry. The committee was constituted on Nov. 2, 2017, and only met three times before
finalizing this bill. However, the community is confident that the bill is flawed and has
been tirelessly campaigning to convince lawmakers to reexamine the IMC recommendations.

Shetty shared with news.Bitcoin.com the short term and long term effects of banning
cryptocurrencies in India. In the long run, he explained that “India will see a massive brain
drain,” as skilled citizens move out of the country to seek opportunities elsewhere. Bahrain,
for example, has already been courting Indian startups to set up shop there, marketing itself as
a crypto-friendly country.

If the government decides to ban cryptocurrency, “India will not have blockchain and crypto
expertise leading to no crypto-related work reaching India,” the Wazirx executive pointed out,
emphasizing that the country stands to “lose billions of dollars worth of investment that the
crypto sector can potentially attract.” Consequently, “Hundreds of jobs will be lost,” he
indicated, elaborating:

“Indian citizens will lose hundreds and thousands of crores of their hard-earned money …
India will lose out on thousands of jobs that would otherwise be generated if the crypto
sector was to be positively regulated”.

5.4 Hurting Legitimate Players

Whether done in fiat currency or cryptocurrency, “Illegal activities, money laundering, and
terrorist financing are the top concerns for the government of India,” Barchha asserted. “As of
now, every exchange allows trading after verifying documents rigorously,” he described,
affirming that “A ban will result in [the] closure of all exchanges and that will result in no
accountability of transactions.” He further conveyed that “People with illicit intentions are …
going to deal in crypto using their own network,” elaborating:

“Indirectly, the government of India will increase their headache of tracing illegal
transactions, which would have been easier if strict KYC based exchanges are regulated”.

On the other hand, he opined: “honest traders or investors won’t give up their faith on the
technology and they will trade in cash through peer-to-peer portals. They won’t be paying any
School of Computer Science and Engineering, NRCM 19
Cryptocurrency

taxes for these transactions, which is an additional loss for the government.” Recently, The
Indian National Association of Software and Services Companies (Nasscom) voiced its
concerns regarding the proposed banning of crypto assets in India. The association describes
itself as “the apex body for the 154 billion dollar IT BPM industry in India,” which “Liaisons
with government and industry to influence a favourable policy framework.” Nasscom stated
that “A ban would inhibit new applications and solutions from being deployed and would
discourage tech startups” and would also “handicap India from participating in new use cases
that cryptocurrencies nad tokens offer,” emphasizing:

“A ban is more likely to deter only the legitimate operators as they have no intent to be non-
compliant”.

In his open letter to the Indian finance minister, Sohail Merchant, CEO of local crypto
exchange Pocketbits, wrote: “If the ban comes into effect, the black market will continue to
thrive. It will be the common man, compliant businesses, and innovators building upon these
protocols that will be affected.”

5.5 Supreme Court Hearing, One Petition Withdrawn

There is already a banking ban in place in India, imposed by the Reserve Bank of India (RBI)
in its circular issued
in April last year.
The ban went into
effect 90 days later.
A number of
industry
participants filed
writ petitions
challenging the ban,
which the Indian
supreme court was
originally set to
hear in September
last year but
was continually delayed. The wait has caused a few operators to shut down their local
exchange operations, including Zebpay, formerly one of the largest crypto exchanges in India,
Coindelta, Coinome, Koinex, and Cryptokart.

School of Computer Science and Engineering, NRCM 20

Cryptocurrency

During the Aug. 21 hearing, the supreme court instructed the central bank to answer the
representation by crypto exchanges. Shetty told news.Bitcoin.com that the document was
submitted by the Internet and Mobile Association of India (IAMAI) sometime last year. “It’s
basically a set of suggestions that IAMAI had sent to the RBI. Stuff like exchanges following
KYC and AML policies etc,” he clarified. “The objective was to put across the fact that there
are better ways to ensure investor protection and prevent malicious activities in crypto.”

Coinrecoil, the first company to challenge the RBI ban in court, has recently withdrawn its
writ petition. “Yes, we did withdraw our petition last week,” Barchha confirmed. “Even
though being a startup, we decided to take the risk and became the first exchange in the
country to file the petition. We tried our best to stay till the end of the fight. But regardless of
our passion or confidence, at some point, money matters.”

According to Barchha, the financial burden was the only reason for his startup with limited
funds to withdraw its petition. “Most of the investment was done by three directors, friends,
and family. That was enough to build the exchange from scratch, and make it operational for
4 months. The banking ban was a blow to our financial planning,” he detailed.

5.6 Cryptocurrency In India

India with a population that is over 1 billion strong has been on something of an economic
renaissance in the last few years. Such has been the extent of the country’s growth that the
IMF has called it the fastest-growing emerging economy. More than 40 percent of the
country’s
population has
access to telecoms
and internet
services. A country
steeped in mystery,
history, and culture,
it is also not one to
fall behind when it
comes to
technological
advancement.
Bitcoin and other
cryptocurrencies have been operating within the country for a number of years now. This
article looks at the state of the Indian cryptocurrency market.

School of Computer Science and Engineering, NRCM 21

Cryptocurrency

In India bitcoins has been available since 2012.And at present in India there are 11 trading
platforms and around 1 million users of bitcoin. At the movement RBI has banned the
transaction of bitcoins in India. So, one cannot use the cryptocurrency for the payments of
goods and services. Recently in 2018 during the union budget declaration the Indian
government declared that cryptocurrencies such as bitcoins were not a legal tender. There is
no protection available to those using and trading them or dealing in them. In recent days
finance minister Arun Jaitely said when asked by the media the Government views on
cryptocurreny he said the government was aware that the cryptocurrency is being used for the
illegal activities such as terrorism, cryptocurrencies function within the community and they
enjoy the trust of that. According to the Indian government people using these types of
currencies should take certain caution because there is no lawful protection for these
currencies. And no help can be gained by the people from the government side if some fraud
is faced by the people. Regarding the future of cryptocurrencies in India an expert committee
also constituted to measure the risk involved in it. This committee will examine the action of
cryptocurrencies and release the report in few months.

Some countries are accepting the cryptocurrencies while some are not, some of them are yet
to make their decision. Cryptocurrencies has its own set of complications. What are expert’s
views? Experts across the world are coming to the conclusion that cryptocurrencies are here
to stay. The experts say the only way to bring value to the cryptocurrency is by issuing the
real money instead of it. The experts also talk about the risk trading cryptocurrencies because
here is no law on the fraud done in these types of digital currencies and also the cyber crime
can be its biggest demerit as it all works online. According to the experts and many research
papers the copy of cryptocurrency can be made and a false transaction can be done so the
trading would not be a safe one. There is still a lot and lot of analysis to be done on this and a
healthy result would come out from it which would tell us a brief idea about the usage of
cryptocurrency its pros and cons, and why it can swap the physical money in the market. So
how do they do this? One method is to deal in art objects. Buy a curio in local currency. Then
sell that curio abroad in a foreign currency. Even if they do not make a profit, they at least
would own some foreign exchange, having bypassed exchange regulations. Suppose the curio
in question is just a few lines of computer code? So buy some lines of computer code in local
currency, and sell those lines for foreign currency. Even better, if they can do this transaction
anonymously, for that would ensure that their stash of foreign exchange would not even come
to the knowledge of the snoopy authorities. Welcome to China (did you think I was referring
to someplace else?), a large prosperous nation with currency controls and a one-party
government. Welcome to bitcoin, ethereum, litecoin, et al, - computer codes that are curios
and crypto-currencies.

School of Computer Science and Engineering, NRCM 22

Cryptocurrency

Bypassing currency controls Bitcoin is of course, the most well-known and oldest of these
virtual currencies. And, bitcoin is extensively used to bypass currency controls, not just in
China, but in Greece and other places as well. Bitcoin has become popular in India as well.
Volumes of rupee trading in bitcoin have exploded this year – over 2,500 Indians trade
bitcoins daily. Not coincidentally, demonetisation of 86% of Indian currency on November 8
triggered off an explosion of interest. Some estimates indicate that rupeedenominated bitcoin
trades now generate the third-largest volumes after American dollar and yen. Bitcoin has now
been around for many years and its codes are open-source. But many people don’t understand
how it works. Internationally, bitcoins are traded on multiple financial exchanges and they’ve
shot up in value over the last year. Most exchanges insist on some degree of “Know Your
Customer” or KYC details, but there are loopholes. For example, the same person could own
many wallets in which the coins are held. It is possible to layer trades such that it is
impossible to figure out who sold what, when. What’s more, the underlying reason for a trade
is irrelevant – all that is known is that a coin has moved from one wallet to another.

5.7 India’s Government

Although India’s RBI has long warned cryptocurrency users and traders of
its perils, Indian President, Narendra Modi, indirectly promoted Bitcoin, on
July 2, 2015, with his ambitious Digital India. Plans included digitizing
government data, improving India’s digital infrastructure, and optimizing
its online connectivity. Last month, the government formed an inter-
disciplinary committee to examine the framework on virtual currencies
and set up a forum MyGov for public opinion on virtual currencies.
Last week, India’s Department of Economic Affairs in its Ministry of Finance met to
discuss how Bitcoin could be regulated. The committee suggested the following: that
cryptocurrencies should be governed by the Reserve Bank of India Act of 1934; that Bitcoin
investors should be taxed; that guidelines for buying and investing in cryptocurrencies should
be drafted; that the IRB should extend FEMA to cross-border cryptocurrency deals; and that
users should be taxed on their cryptocurrency returns.

Observers predict that India’s government will regulate Bitcoin in stages. India’s Bitcoin
industry welcomes these changes knowing that government acceptance will give the
cryptocurrency the backing it needs. In fact, India’s Bitcoin industry has long tried to
popularize Bitcoin with strategies that include conducting security checks, requesting
identification from users, such as government-verified address documents, Permanent
Account Numbers (PAN) or Aadhaar IDs, and sometimes even checking bank details. Private
Bitcoin companies have also launched an association, called the Digital Assets and

School of Computer Science and Engineering, NRCM 23

Cryptocurrency

Blockchain Foundation India (BFI), to educate lay people on Bitcoin benefits and usage.
Government intervention credits their efforts.

5.8 Impact of GST

The government of India is reportedly taking a different approach to regulating

cryptocurrencies, mulling over an 18 percent Goods and Services Tax (GST) on trading the
digital coins, According to the report, citing Bloomberg, the Central Board of Indirect Taxes
and Customs is looking at the proposal. A finalized draft will be presented to the GST
Council. The government could hit the cryptocurrency with the GST tax retrospectively from
July of 2017, which was when the GST was created, noted the report.

For the government of India to tax cryptocurrencies, the digital tokens have to be considered
goods or commodities instead of currencies and securities. The miners, exchanges and wallets
would be considered as
services that enable the
supply of goods. If the
tax becomes law it will
mark a big change in
how the government of
India has been
approaching
cryptocurrencies.

The Reserve Bank of

India (RBI), India’s
central banking institution, has long been a critic of cryptocurrencies, warning users about the
risks since as far back as 2013. In April, RBI banned regulated financial institutions in the
country from dealing with cryptocurrencies, CNBC reported.
The bank wrote in a statement, “In view of the associated risks, it has been decided that, with
immediate effect, entities regulated by RBI shall not deal with or provide services to any
individual or business entities dealing with or settling [virtual currencies].”

Institutions that currently provide services related to cryptocurrencies will have to end those
relationships “within a specified time.” The bank said a circular with more information is
being issued separately.

In February, India’s finance minister said — per a transcript from The Hindu newspaper —
that the government would “take all measures to eliminate the use of these crypto-assets in

School of Computer Science and Engineering, NRCM 24

Cryptocurrency

financing illegitimate activities or as part of the payment system.” And, in December, India’s
finance ministry decried bitcoin trading (and other associated cryptocurrencies), claiming that
it is, at base, the same as buying into a Ponzi scheme. The finance ministry noted that
cryptocurrencies are not legal tender and, therefore, offer users absolutely no governmental
protections.

5.9 Impact of Demonetisation

On November 8, 2016, the Reserve Bank of India (RBI) removed 500 and 1000 Rupee notes
from circulation, stripping the nation of 86% of its currency. At a time when the Narendra
Modi government’s
decision to
demonetise high-
value currency notes
has left Indians
scrambling for
alternative payment
and investment
options, the demand
for new-age
cryptocurrency
options has seen a
surge. For this and
other reasons,
Bitcoin, the largest
and oldest of
cryptocurrencies, is trading at a huge premium in the country.

The demand spike in India follows a similar trend in neighbouring China. In the past month,
while the dollar strengthened, and the Chinese currency weakened to an eight-year low, the
demand for Bitcoin in China increased dramatically. Over this period, the price has surged
over 25% to around $740 per Bitcoin on major global exchanges.

On Indian exchanges, the Bitcoin prices are being quoted at 25-28% higher than cost. The
interest among people here has been fuelled mainly by the government’s demonetisation
move.

School of Computer Science and Engineering, NRCM 25

Cryptocurrency

On November 8, Bitcoin was priced at about Rs 52,000 on leading Bitcoin trading exchanges
Unocoin and Zebpay. On that day, the international cost of one Bitcoin, when converted into
rupee, stood at Rs 46,942. So, the difference between the cost and trading quote came to about
10%. Compared with that, the trading price at present is at Rs 64,000, while the international
price is around $740 (about Rs 51,000), a difference of over 25%

Unocoin Chief Executive Officer Sathvik Vishwanath says: “The price of Bitcoin is higher
than the international price because there is high demand but limited supply for Bitcoin
among Indian traders.”

Sandeep Goyenka, CEO of Zebpay, India’s largest Bitcoin exchange by volumes traded, says:
“There is a surge in interest for Bitcoins. Indians are inquiring about Bitcoins as an alternative
and safe investment option. They are downloading Zebpay as they want to experiment with
digital currencies. There has been a 50% increase in Zebpay downloads.” Google search data
show that Indians’ search for the keyword ‘Bitcoin’ was at its peak soon after demonetisation.

Sathvik adds: “It cannot be easily imported because of capital controls in India,” so the supply
is always less than demand. But, his company Unocoin targets Indians abroad looking to send
remittances home. The best way, he suggests, is to buy Bitcoin on an international exchange
and transfer it to India, where it can be immediately sold on a Bitcoin exchange. The transfer
can take place through blockchain, a transparent public ledger. The Indian receiver, while
encashing it, gets a premium and all deals are done using the banking channel, with proper
know-your customer records.

5.10 Impact of High Crypto Prices

The general level of prices of cryptocurrencies in India is on the high side. Market rates are
relatively higher by as much as 5 to 10 percent compared to the global average. This means
that Indians can only get involved in peripheral participation in crypto trading as far as
international crypto exchange platforms are concerned. Lack of large-scale mining facilities
especially with regard to Bitcoin has been identified as a reason for this. Also, strict
government restrictions on international money flow also make it significantly difficult for
Indians to transact with many of the large foreign crypto exchange platforms. The emergence
of local platforms has helped to alleviate this issue to some extent as it is now a little easier
for lower income citizens to gain access to cryptocurrencies.

School of Computer Science and Engineering, NRCM 26

Cryptocurrency

5.11 Indian Companies using Cryptocurrency

Several top corporates and banks are experimenting with virtual currency as a more
transparent treasury management tool for optimal utilisation of working capital settlement
among subsidiaries and paying vendors and suppliers while being cautious about regulatory
compliance.
Even as bitcoin loses sheen, some companies and banks are looking to use digital currency for
their internal operations based on blockchain technology, said people with direct knowledge
of the matter. They said Hindustan Unilever Ltd (HUL), Reliance Industries Ltd (RIL), HDFC
Bank and ABG Shipyard are among those running such pilots for internal treasury
management, record
keeping and trade
finance functions. ET
spoke to some of the
people working directly
on blockchain pilots.
HUL said it is constantly
looking to bolster digital
capabilities. RIL, HDFC
Bank and ABG Shipyard
didn't respond to queries
"The cryptocurrency
would only be used by
the companies and banks internally," said one of the persons cited above. "It will mainly be
effective as a working capital management tool, where rather than actually transferring
money, cryptocurrency will be transferred and accounts shall be reconciled at a later date."
The companies and banks involved in the pilot projects have not yet set a definite timeline for
scaling up usage.

A company with several subsidiaries has to move money back and forth among the various
entities. These transfers can number in the millions annually, especially in infrastructure and
banking. Currently, these could be book entries or actual money may have to be paid and
received. This is where an internal cryptocurrency comes handy, experts said. Several large
companies are evaluating various use cases of blockchain, including in areas such as
managing intra-group transactions and as a logical extension, looking at its use as a group
treasury management tool for more efficient cash and working capital management," said Sai
Venkateshwaran, partner and head of CFO advisory, KPMG, in India. "Apart from greater
efficiency and accuracy, it has the potential to bring enhanced levels of transparency for
group
School of Computer Science and Engineering, NRCM 27
Cryptocurrency

treasury management and also cost saving .

"In line with our vision of 're-imagining HUL,' we are constantly looking to augment digital
capabilities in our business," a company spokesperson said. "We are currently working on a
number of experimentation projects across our value chain which will propel us into the
future and redefine the landscape in which we operate." Corporates are experimenting with
cryptocurrencies to reconcile accounts, with actual money being transferred only at the end of
the financial year or quarter.

5.12 Difference between actual investment and virtual investment

Actual investment Virtual investment

1) Tax benefit. 1) No tax benefit.

2) High future forecasting. 2) Low future forecasting.

3) Can’t use in black market. 3) Can use in Black market

4)Regulatory body are RBI,
government, SEBI 4) There is no regulatory body
5) Transaction can be reverse 5) Transaction cannot be
without consent of receiver reverse without consent of
receiver.
6) High credibility 6) Low credibility
7) There is involvement Third 7) There is no involvement
party. E.g.- Bank. of Third party
8) Three days for settlement. 8) Payment & settlement is on
the spot.
9) Eg. Debt, Shares, 9) E.g. Bitcoin , ripple,
Properties, PPF, Gold, etc Litecoin, Gridcoin etc

School of Computer Science and Engineering, NRCM 28

Cryptocurrency

School of Computer Science and Engineering, NRCM 29

Cryptocurrency

School of Computer Science and Engineering, NRCM 30