Cryptocurrency: Evolution, Functioning, Legal Framework and Future Prospects with Special Reference to India

Abstract

Cryptocurrency has emerged as one of the most disruptive innovations in the financial ecosystem. From its early conceptualization in the 1980s to the launch of Bitcoin in 2009, digital currencies have evolved into a global phenomenon. This paper traces the history and meaning of cryptocurrencies, explains their functioning through blockchain technology and examines prominent types such as Bitcoin, Ethereum and Ripple. It highlights the advantages and disadvantages of digital currencies, including opportunities for investment, challenges in security and the risk of fraud and scams. The study also evaluates the legal and regulatory framework in India, where the stance on cryptocurrencies has oscillated between bans, cautious acceptance and taxation. With growing investor interest, India’s government has moved toward regulation rather than prohibition, as seen in its taxation regime and the planned launch of the Reserve Bank of India’s digital currency. The paper concludes with policy recommendations for transparent regulation, robust security measures and entrepreneurial opportunities, indicating that while volatility and risks persist, cryptocurrencies are poised to become a significant part of India’s digital economy.