What is crypto?
Currently every country has its own currency regulated by its topmost federal bank. They are bought and sold and exchanged in the international currency markets like stocks. Owing to the popularity of the US in the last century and the stability and predictability of its economy, the dollar has become the most popular and trusted currency all over. Almost all countries keep large reserves of dollars and most international trade are carried out with it. It’s the literal meaning of a ‘global currency’. But any true global currency must be regulated by some institute that represents the world just like UNO. But, on the contrary, the ‘global currency’ dollar $ is regulated by US top banks and that can definitely lead to certain manipulative advantages for the US. To offset this some countries have started to keep a basket of currency reserves including the likes of Euro. If the popularity of the dollar falls in future for whatever reason, other currencies may try to fill up the vacuum created by it.
Now the emergence of the internet has generated a new breed of global currencies, cryptocurrencies, which are regulated not by any country but by some companies.
Say someone starts a company called ABC Pvt Ltd which develops a digital platform and floats a new digital cryptocurrency called abxCoin (C). He simply links the value of C1 to $1 and makes them equal and connects it (C1) to many other currencies via the international currency market. Now one can see that this digital platform is accessible across all countries on the internet. Suppose any company in the US can buy C10000 by depositing $10000 in the bank account linked to his company ABC Ltd. Also another company in India can buy C10000 by depositing ₹70,0000 (1$ = ₹70). If these Indian and US companies want to transact some random business like import or export, they can easily do it with abxCoins as a mutually agreed upon common currency. But here their trust in between those companies is essential. Because ripping off anyone in this is very easy if someone is fly by night. But serious entrepreneurs can grow their business well.
Thus we have Bitcoins, dogecoin, Ethereum, etc. with some variations. Of course cryptocurrencies need not be pegged to 1 dollar as it was done above for simplicity.
One more important feature of cryptocurrencies is the security that they provide from hacking. A technology called Blockchain technology is used in it where a new transaction is linked to the series of old transactions and hacking is not easy like some hacker can hack an isolated transaction. In fact federal banks all over the world are now looking at ways they can also adopt this Blockchain technology for extra safety for their own currencies.
Is crypto currency legal?
In India, RBI issued a circular in 2018 directing the banks, NBFCs, and other payment service providers to not provide any services to the Crypto Exchange and to not have any commercial relations with them.
However, in 2020 the Supreme court declared the circular issued by RBI before as unconstitutional and lifted the ban.
In January of 2021, Govt issued a statement that it will introduce a bill and a sovereign digital currency will be created and all the private currencies will be banned.
However, currently there is no law in India that puts a ban on these cryptocurrency or declares them illegal.