Crypto-Currency Laws in India

Introduction

A cryptocurrency is known as a digital asset designed to work as a medium of exchange wherein individual coin ownership is recorded in stored ledger existing in a form of computerized database using strong cryptography to secure transactions records and to control the creation of additional coins and to verity the transfer of ownership.[1]

Crypto Currency definition and features

Cryptocurrency is a non-physical form of currency and has no central authority to regulate. It is used by a decentralized control as it is minted or created prior to issuance by a single user.

Furthermore, when implemented with decentralized control, each crypto currency works via distributed ledger technology with a blockchain which serves a public transaction database. Bitcoin was first released as an open-source software in 2009 as the first decentralized crypto-currency.

Cryptocurrencies are financial assets which can be used a mode of payment and security. However, the cryptocurrency is not linked to any underlying assets in the real money economy. The digital currency value is depended on the supply and demand.

Objective of Crypto Currency

The financial lending and borrowing institutions objectives are as follows: –

• Consumer Protection Regulation.
• Prudential Regulation.
• Financial Stability.
• Systematic Risk.

Need for Crypto Currency

• Protection from inflation- Inflation are caused by many currencies to get their value decline in time but with cryptocurrency there would be  fixation of amount. If the value increases it will keep the market stable and pre  Self-governed and managed- The crypto currency being decentralized gives ease for self-governance and management.
• Security and Privacy- Privacy and security have always been a major concern for cryptocurrencies. The blockchain ledger is based on different mathematical puzzles, which are hard to decode.
• Easy exchange of exchange- Crypto currency is easy to trade and use on wallets and exchange.
• Cost-effective mode of transactions- With the help of cryptocurrency, the transaction fees paid by a user is reduced to a negligible or a zero amount. It does so by eliminating the need for third parties, like VISA or Pay Pal, to verify a transaction.
• Fast transfer- Cryptocurrency are easy and fast transfer between international or domestic territory.

Disadvantages of Crypto Currency:

• It could be hacked easily.
• No regulatory to control and monitor the exchange.
• Effect on mining environment.
• Few coins will not availably trade.
• Data leakage risks.
• Usage for illegal transactions.
• Lack of acceptance in India due to cash market.

Legality of Crypto Currency

The legality of cryptocurrency is different and varies from state to state and undefined in statutory bases. Whereas the majority of countries have not legalised the usage of crypto as money commodity due to lack of regulatory authority.

India on Regulating Trades

On 1^st February 2018, the late Finance Minister Arun Jaitley on his budget speech stated that the government will do everything to discontinue the use of bitcoin or cryptocurrency in India for criminal uses. He said that India does not recognise them as legal tender and will instead encourage blockchain technology in payment systems.[2]

In early 2018, the Reserve Bank of India announced the ban on the sale or purchase of cryptocurrency for entities regulated by RBI.[3]

In 2019, a petition was filed by the Internet and Mobile Association of India with the Apex Court which challenged the legality of cryptocurrency and seek a direction to restraint their transaction. In March 2020, the Apex Court allowed the verdict to revoke the RBI ban on cryptocurrency trade.[4]

India’s take on regulation trade for cryptocurrency is crucial as more than Asian nation countries has more impact for the virtual currency.

India’s federal government was thinking to explore possible usage of blockchains structure which can be used for public store transactional records or blocks in several networked database to manage land records, pharmaceutical drugs supply, logistics record for e-waybill etc. It plans for a virtual currency but not in favour for cryptocurrency.

If India bans the cryptocurrency trading it could affect more than 1.7 million Indian trading in digital assets and companies dealing with it.[5]

Conclusion

India needs a regulatory framework for cryptocurrency to protect the retail customers and make the most of the platforms to attract cryptocurrency investors and business types. The uncertainty and the adverse view taken by the RBI with respect to cryptocurrency have effectively negated the possibility of such businesses being established in India. Unless the RBI and the Central Government use this opportunity to draw up a reasonable regulatory framework for persons desiring to issue, mine or trade in Cryptocurrency, India will again be behind the curve in reaping the benefits of this market.

REFERENCES

• [1] Andy Greenberg (20 April 2011). “Crypto Currency”. Forbes. Archived from the original on 31 August 2014. Retrieved 8 August 2014.
• [2] Anand, Nupur. “Arun Jaitley has just killed India’s cryptocurrency party”. Quartz. Retrieved 1 February 2018.
• [3] “India bans crypto-currency trades”. BBC. 6 April 2018. Retrieved 20 February 2019.
• [4] “Supreme Court Lifts Ban on Cryptocurrency Trading in India”. The Quint. 4 March 2020. Retrieved 4 March 2020.
• [5] https://www.bloombergquint.com/global-economics/india-plans-to-introduce-law-to-ban-trading-in-cryptocurrency

 This article is authored by Akshata Pai, student at Chembur Karnataka College of Law.