Future of Fintech and Cryptocurrency in India

Future of Fintech and Cryptocurrency in India


Cryptocurrency is a digital asset designed in a way to act as a medium of exchange. The Cryptocurrency has a set cap of 21 million bitcoins, which makes its demand high. And as being finite, its price tends to increase, and now it has even crossed the value of Gold. The most famous form of cryptocurrency is bitcoin, which is said to be founded by Satoshi Nakamoto, a pseudonymous developer in 2009. Cryptocurrency such as Bitcoin, Litecoin, etc. are based upon series of Information Technology concepts. A cluster of concepts, practices and material of developed technology have been put together to form such a defined and secured mode of electronic payment, which is now used worldwide.

Validity of each and every cryptocurrency coins is provided through a blockchain, which is a growing list of records, often termed as blocks, which are linked and secured through cryptography. These blocks are interlinked to each other by a hash pointer. These blockchains are designed in a way to restrict modification of data. It is an open, distributed ledger that records transactions between two parties efficiently and in a verifiable and permanent way. For use as a distributed ledger, a blockchain is typically managed by a peer-to-peer network collectively adhering to a protocol for validating new blocks. Once recorded, the data in any given block cannot be altered retroactively without the alteration of all subsequent blocks, which requires collusion of the network majority.

India’s Finance Technology, i.e. fintech is a new advanced technology which is growing rapidly. It has a large marketing base and is an innovation driven startup with friendly policies and regulations. This sector can be said to be an emerging dynamic sector as both banking institution and non banking financial institutions are investing and playing catch up. Earlier this year, the National Association of Software and Services Companies (NASSCOM) reported that around 400 fintech firms operated in India, boosted in large part by foreign investments in fintech-focused startup accelerators and incubators. A lot of work is carried out through this technology and it is emerging as one of the diverse sectors in marketing. Hence, fintech and cryptocurrency can be said to move hand in hand.


Govt. of India in early 2018 stated that cryptocurrency such as Bitcoin are not a legal tender in India and it would take all measures to eliminate use of these crypto-assets in financing  illegitimate activities or as part of the payment system, but “the government will explore use of blockchain technology proactively for ushering in the digital economy.”[1]

The govt. expressed two main concerns that the law would address; “the source of money being used to trade in cryptocurrencies and regulation of exchanges of virtual currencies to protect the common man.”

An interdisciplinary committee, chaired by the Special Secretary (Economic Affairs) was established in April 2017 “to examine the existing framework with regard to Virtual Currencies.” and “explore the feasibility and desirability of issuing a digital currency by the central bank.” The committee had nine members which included representatives of the Department of Economic Affairs, Department of Financial Services, Department of Revenue (CBDT), Ministry of Home Affairs, Ministry of Electronics and Information Technology, Reserve Bank of India, National Institution for Transforming India (NITI Aayog), and State Bank of India. The role of the committee was to

  • Analize the current status of Virtual Currencies in India and around the globe
  • Examine upon existing global regulatory and legal structures governing Virtual Currencies
  • Suggest measures for dealing with such Virtual Currencies including issues relating to consumer’s security, money laundering, etc.
  • Study any other matter related to Virtual Currencies which may be relevant.

On 7th August, 2017 a report was submitted, but its details were not made available for public.

On November 13, 2017, the Supreme Court of India admitted under article 32 of the Constitution a Public Interest Litigation writ petition against the Union of India and issued a notice to the Ministry of Finance, Minister of Law and Justice, Ministry of Electronics and Information Technology, Securities and Exchange Board of India, and Reserve Bank of India. The petition seeks “a regulatory framework to be laid down on Crypto Currency and wanted that the virtual currency be made accountable to the exchequer.” [2]

On April 6, 2018, Reserve Bank of India (RBI) issued notification prohibiting financial institutions to ‘deal with virtual currency’, It stipulated the risk associated, and with immediate effect decided that banks regulated by Reserve Bank of India (RBI) shall not deal with virtual currencies or provide facilitation to any person or entity dealing with virtual currencies.

Services which were prohibited comprised of maintaining accounts, registering, trading, settling, clearing, giving loans against virtual tokens, accepting them as collateral, opening accounts of exchange dealing with them and transfer/receipt of money in accounts relating to purchase/ sale of Virtual Currencies. RBI stated that “regulated entities which already provide such services shall exit the relationship within three months from the date of this circular.”[3]

Reserve Bank of India (RBI) had advised to take precaution the use of cryptocurrency, it also duly issued notifications regarding cautioned users, holders and traders, that trade of such cryptocurrency is risky and it also clarified that it had not authorized anyone to operate such schemes officially. And, if a license regarding the same is shown, do not trust it.

RBI had imposed a ban in early 2018 on trading of Cryptocurrency, but the SC on 5th March 2020, lifted the ban on cryptocurrency, referring to Article 32 which deals with Remedies for enforcement of rights.

Supreme Court held that the ban was violating article 19(i)(g) for virtual currency details, and the prohibition measure was not proportional to threat. Moreover, the govt. was unable to substantiate the threat with empirical data or credibly examined alternative measures. The govt. till date has been unable to come out with a regulatory framework for cryptocurrencies.

In India, the scale for fintech has been small but the growth rate has been quite satisfactory. India has shown drastic development since 2014. The services offered by institution open an opportunity to expand the market base. There is a great chance for India to grow in this area, but the securities required are the utmost priority for India. The securities if taken care by a proper regulatory framework can allow access to digital asset, and can thereupon benefit Indian market. The necessity of security is utmost important in today’s world and no one can choose an insecure way, especially when deal involves money. As far as the response has been acknowledged, it seems that the small startups such as zebpay, unocoin have gathered a large public by offering appropriate security. Therefore after the ban has been struck down by Supreme Court, digital database would offer a great marketing base provided RBI stabilizes the regulatory functions, and lays down the specific framework requiered.

The decision of Global decentralized cryptocurrency exchange Binance group setting up $50 million(Rs. 370 crore) blockchain technology fund for India[4] soon after struck down of ban by Supreme Court will help India create a strong digital setup.


Technology is continuously advancing day by day, and as the technology is advancing, it is opening a land of opportunities for fintech institutions, and as the understanding of technology would increase, blockchain would be adopted on a bigger scale and would enter the mainstream. It would create a situation wherein auditors could use real time access to relevant financial information in matter of seconds, which would be different from present situation wherein the auditor could only get access to data at the end of financial year.

Cryptocurrency, in the near future would be an essential factor to determine digital asset, and if necessary reforms and regulations are made soon by the govt., it would lead to future benefits of the country. If the statistics are taken into consideration, then it creates a serious issue of proper implementation on laws to regulate cryptocurrency. Therefore, it is recommendable to formulate laws on digital security soon, so as to create a base for digital functions in India.

It is high time that government should start looking at blockchain technology as a helpful platform to promote e-Governance.

Hence, It is important to shift from cash to digital setup, after all “Change is the rule of life.”

[1]  https://www.loc.gov/law/help/cryptocurrency/world-survey.php

[2] http://supremecourtofindia.nic.in/supremecourt/2017/35252/35252_2017_Order_13-Nov-2017.pdf

[3]  http://pib.nic.in/newsite/PrintRelease.aspx?relid=160923

[4] https://economictimes.indiatimes.com/small-biz/startups/newsbuzz/cryptocurrency-exchange-binance-sets-up-50-million-indian-blockchain-fund/articleshow/74665232.cms?from=mdr

Author: Arunabh Srivastava,
Symbiosis Law School, NOIDA, 2nd Year

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