In past years, cryptocurrency has become a worldwide phenomenon but there is still a lot to learn about this technology advancement. Many thoughts and worries surround the innovation and its potential to undermine established banking systems. Thus, Pragyan Crossfires is back with even more of the top intellectual and creative minds to encourage you with their expertise.
What does the future look like for Cryptocurrencies and NFTs in India?
Cryptocurrencies powered by encryption algorithms, have established themselves as an alternative form of payment due to their accompanying ease of transaction and anonymity. Cryptocurrencies are still relatively new, and the market for these digital currencies is highly volatile. Since cryptocurrencies do not need banks or any other third party to regulate them, they tend to be uninsured and are hard to convert into tangible currencies such as US dollars or Euros.
While some countries have entirely banned cryptocurrencies, some have partially tried to regulate their flow in the economy. El Salvador became the first country to declare Bitcoin as legal tender officially. In February 2021, Canada became the first to approve a Bitcoin exchange-traded fund (ETF). Further, crypto trading has gained prominence in India, with 105 million Indians having invested a massive sum of $10 billion in cryptocurrencies. However, the Reserve Bank of India maintains a guarded stance, stating that cryptocurrencies pose a threat to the “macroeconomic and financial stability of the country”. The Government has recently announced a 30 per cent tax that will apply on income from the sale or acquisition of cryptocurrencies and NFTs.
Furthermore, the absence of institutional regulation renders crypto investing risky. This poses a question on how investors can safeguard their digital currency portfolio. The alternative is to invest in stablecoins. Put simply; they can be seen as a bridge between a volatile cryptocurrency and a stable fiat currency. Whether stablecoins are the solution to the issue governments face worldwide is something only time can tell.
Moving further, Non-Fungible Tokens or NFTs are cryptographic assets on a blockchain. They differ from fungible tokens like cryptocurrencies, which are identical to each other and, therefore, can be used as a medium for commercial transactions.
The foremost advantage of non-fungible tokens is that they associate ownership to a single account. NFTs are indivisible and cannot be distributed among multiple owners. At the same time, the ownership advantages of NFTs ensure that buyers are safe from the concerns of fake NFTs and transferring the ownership of NFTs is easy.
In India, there is an exponentially growing interest in NFTs, buoyed by the slew of NFT releases by prominent celebrities. Amongst them are Bollywood superstars Amitabh Bachchan and Salman Khan, whose plans for launching their collection are on the anvil, and cricketers like Dinesh Karthik. The latter have already put up NFTs based on iconic moments from their sports career.
However, there have been multiple concerns raised about NFTs. An NFT involving digital art generally does not store the associated artwork file on the blockchain due to its size. The token functions with a web address pointing to the piece of art in question. As NFTS are functionally separate from the underlying artworks, anyone can easily save a copy of an NFT’s image. Thus critics have compared the value of a purchased NFT to that of a status symbol. There have been cases of artists having their work sold by others as an NFT without their permission. A famous example is a seller posing as “Banksy” who succeeded in selling an NFT supposedly made by the artist for $336,000 in 2021.
Cryptocurrencies and NFTs are also embroiled in controversies due to the high power consumption involved in their usage, transactions on blockchains, and the consequent greenhouse gas emissions. A significant example is the ‘proof-of-work ‘ protocol required to regulate and verify blockchain transactions on networks such as Ethereum; its usage consumes a large amount of electricity. Bitcoin mining alone generates about 96 million tons of carbon dioxide emissions each year, comparable to those generated annually by countries like Ireland, Denmark and Bangladesh.
The magnitude of global stature that cryptocurrencies and NFTS may attain is anyone’s guess. What is certain is that the number of people investing in them is almost definitely going to increase. Therefore, it is imperative to discuss how they may evolve and impact the future, especially in populous countries like India, which is our agenda at hand.
