Introduction
A cryptocurrency is a digital or virtual currency that is protected by encryption, making counterfeiting and double-spending practically impossible. Many cryptocurrencies are built on blockchain technology, which is a distributed ledger enforced by a distributed network of computers. Cryptocurrencies are distinguished by the fact that they are not issued by any central authority, making them potentially impervious to government intervention or manipulation. Cryptocurrency is created and held electronically. They are unregulated in many countries, including India, due to a lack of a sufficient legal framework.[1] Cryptocurrencies is one of the hottest topics of the 21st century and are the future of investments which are backed by many famous billionaires such as Elon Musk and Mark Cuban to name a few. [2]
Brief History of Cryptocurrency in India
India has seen a colossal blast in digital currency trades because of its undiscovered, unregulated market with a possible worth of over a trillion dollars. Because of the massive fame of the crypto market, its utilization inside a year, and the potential income misfortune, the Indian government, controllers, and specialists started to focus, and in 2013, the Reserve Bank of India gave an official statement that alerted people in general against managing in virtual monetary forms like Bitcoin. The Indian government formed a high-level Inter-Ministerial Committee in November 2017 to report on several problems relating to the use of virtual currency. This Committee issued a report in July 2019 suggesting a blanket ban on private cryptocurrencies in India. Notwithstanding the way that the Inter-Ministerial Committee’s report was all the while forthcoming, the RBI gave around toward the beginning of April 2018 disallowing all commercial and cooperative banks, small finance banks, and non-bank monetary organizations from not only dealing in virtual monetary forms as well as from offering types of assistance to all substances managing in virtual monetary standards.
This effectively brought the crypto sector to a halt, as exchanges required banking services to transmit and receive money in order to turn it into cryptocurrency and pay workers, vendors, and office space, among other things. The situation surrounding cryptocurrencies and their use, however, drastically changed on March 4, 2020, when India’s highest court, the Hon’ble Supreme Court of India, issued a well-considered judgement quashing the RBI’s previous ban. The subject was primarily addressed by the Hon’ble Supreme Court of India in light of Article 19(1)(g) of the Indian Constitution, which provides the right to practise any profession or carry on any occupation, trade, or business, as well as the idea of proportionality.[3]
Legality of Cryptocurrency
The judgement by the honourable Supreme Court of India in March 2020 has paved the way of financial institutions facilitating the trading of cryptocurrencies, creating the ground for several crypto market exchanges in the country. Since the judgment, there has been a sudden rise in the platforms trading in cryptocurrency, examples are WazirX, BuyUcoin, CoinDCX etc. The cryptocurrency industry in India is now booming, and ordinary investors are adding fuel to the fire with their enthusiasm. India is projected to have over 10 million crypto investors, with the number growing by the day. In 2018, The Finance Ministry released a statement saying:
“The Government does not regard Cryptocurrencies as “Legal Tender or Coin” and will take all necessary steps to prevent the use of these Crypto Assets in financing “illegitimate activities” or as a part of the payment system. The Government will proactively explore the use of Blockchain technology for assuring in the Digital Economy.”
By 2020, the progressions that crypto-directed nations like the United States, Singapore, and others had made had provoked Indian specialists to rethink their position. Accordingly, the RBI’s round from 2018 was repudiated by the Supreme Court of India, permitting banks like HDFC Bank, Yes Bank, ICICI Bank, and the State Bank of India to continue their exchanges with digital money trades. India had effectively gotten on board with the cryptographic money fad a couple of months in. We re-emerged the market when the securities exchange was hitting new lows each day and digital currencies were taking off consistently. It didn’t take long for digital currencies to set up a good foundation for themselves as a reasonable monetary choice. Because of the expanded use of digital currencies, the public authority has reported the presentation of a new crypto bill. Individuals anticipated that the action would be hostile to digital currency even before it was presented. However, Finance Minister Nirmala Sitharaman clarified the situation, saying:
“We make it clear that we are not ruling out all possibilities. We will allow users to play with the blockchain, bitcoins, or cryptocurrency during specific times.”
She additionally expressed that blockchain is an enormous topic, and that fintech’s development is subject to such initiatives. She additionally expressed that India enjoyed a cutthroat benefit.[4]
Subsequent to vacillating about whether to sanction or restrict cryptographic forms of money, the Indian government has made a positive advance towards managing digital currencies in the country. Organizations should now proclaim their crypto exchanging/ventures during the monetary year, as indicated by the Ministry of Corporate Affairs (MCA). Specialists consider it as a positive advance and expect that the tax assessment guidelines will be followed. This is considered the first step in India’s endeavours to regulate cryptocurrencies. The goal of crypto-asset accounting is to prevent illegal behaviour and the circulation of black money. More public disclosures may also aid in the improvement of corporate governance. The Centre has assured crypto aficionados that there would be no blanket ban on digital currencies and that it is still forming a position on the matter. The finance minister, Nirmala Sitharaman, emphasised that the government is open to experimenting with new technologies and has not ruled them out.[5]
The Finance Ministry intends to devote more work to this and to produce a set of cryptocurrency guidelines as soon as possible. These statements by the Finance Ministry gives us a ray of hope that cryptocurrencies might not be banned in future and might be legalized in India. Moreover, regardless of its stresses over cryptocurrencies, the government is fostering its own digital money. The government would not like to miss out in the new time of innovation, and hence it subsequently intends to take utilization of the benefits that blockchain innovation gives. “The opportunity has arrived to take advantage of its uses while likewise improving the digital infrastructure,” RBI Governor Shaktikanta Das said in February when revealing that the central bank is working on a digital currency.[6]
Legalization of Cryptocurrency Abroad
Countries like El Salvador and Australia are some of the countries to legalize the trading of cryptocurrency. El Salvador is the first country to give Bitcoin the legal tender to be used as a currency. The Legislative Assembly of El Salvador passed the Bitcoin Law on June 8, 2021, making the cryptocurrency bitcoin legal cash in El Salvador after September 7, 2021. President Nayib Bukele had proposed it. “The purpose of this legislation is to regulate bitcoin as an unrestricted legal tender with unlimited transactions and access to any title that public or private natural or legal entities require,” according to the bill’s text.[7]
Cryptocurrencies have been declared legal in Australia since 2017. They are required to follow the Anti-Money Laundering and Counter-Terrorism Financing Act laid down by the government to ensure cryptocurrencies are not used for any wrong purpose. Bitcoin and other cryptocurrencies are subject to the Capital Gains Tax. In 2018, AUSTRAC, Australia’s financial intelligence agency, put new rules in place for digital currency exchange (DCE) operators. DCEs were now required to register with AUSTRAC and comply with the government’s AML/CTF compliance and reporting obligations. Furthermore, according to the Australian Securities and Investments Commission (ASIC), there are now regulator guidelines that crypto-asset participants must follow, such as issuers of crypto-assets, crypto-asset intermediaries, miners and transaction processors, crypto-asset exchange and trading platforms, payment and merchant service providers, wallet and custody service providers, and consumer financial services providers.[8] Cryptocurrency has a huge potential worldwide and many countries are legalizing it. It is therefore anticipated to be legalized in the future and may be used as a uniform currency of exchange throughout the world.
Conclusion
In light of the deductions that can be gotten from the previously mentioned realities and the present status of issues in the cryptocurrencies, plainly there is a lack of clarity in India with regards to cryptocurrency legislation. Cryptocurrency legislation that includes crypto trading exchanges, blockchain technology, investors, and people who operate in the industry is urgently needed, and such regulation demands more attention. It’s significant that the advantages of cryptographic forms of money were underlined in the Ministry of Electronics and Information Technology’s Draft National Strategy on Blockchain, 2021. Accordingly, precluding worldwide virtual currency, which has a huge effect in numerous countries, isn’t the best decision for our nation’s turn of events. As a stage forward, the government should find significant ways to control cryptocurrency to acquire the trust of investors and the general public in a developing nation. However, Union Finance Minister Nirmala Sitharam has expressed that there won’t be an absolute prohibition on digital currency – ” we will allow a certain amount of window for people to experiment on the blockchain, bitcoins, and cryptocurrency “. Before moving forward, it will be important to take a step back and study the government’s cryptocurrency legislation. Cryptocurrency has a lot of promise, and it will develop over time as an investment and maybe as a currency.
References
[1] Sunitha Abhay Jain, Regulation of Cryptocurrency An Indian Perspective, 56 ECONOMIC AND POLITICAL WEEKLY (2021).
[2] Jake Frankenfield, Cryptocurrency Investopedia (2021), https://www.investopedia.com/terms/c/cryptocurrency.asp (last visited Sep 10, 2021).
[3] Amanraj Singh Chadha, The legality of cryptocurrency in India Legal Developments (2021), https://www.legal500.com/developments/thought-leadership/the-legality-of-cryptocurrency-in-india/ (last visited Sep 10, 2021).
[4] Cryptocurrency: Are your crypto investments legal? Here’s everything you need to know, The Economic Times (2021), https://economictimes.indiatimes.com/markets/forex/forex-news/are-your-crypto-investments-legal-heres-everything-you-need-to-know/articleshow/82259869.cms (last visited Sep 11, 2021).
[5] Cryptocurrency in India: What’s the govt’s STAND, legal status, its future, Business Today (2021), https://www.businesstoday.in/latest/corporate/story/cryptocurrency-in-india-what-the-govt-stand-legal-status-its-future-296570-2021-05-20 (last visited Sep 11, 2021).
[6] Id
[7] Nelson Renteria & Anthony Esposito, El Salvador’s WORLD-FIRST adoption of BITCOIN endures Bumpy first day Reuters (2021), https://www.reuters.com/business/finance/el-salvador-leads-world-into-cryptocurrency-bitcoin-legal-tender-2021-09-07/ (last visited Sep 11, 2021).
[8] Alex Ritchie, Is crypto legal in Australia? RateCity.com.au (2021), https://www.ratecity.com.au/cryptocurrency/articles/crypto-legal-australia (last visited Sep 11, 2021).
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