CRYPTOCURRENCY REGULATION IN INDIA
Introduction
The history of cryptocurrencies goes back to the global financial crisis of 2008, when financial markets were deeply strained and people lost faith in them. During this time, the father of bitcoin, Satoshi Nakamoto, paved the way for the first cryptocurrency using blockchain technology. In January 2009, the first bitcoin block, commonly known as the “Genesis Block”, was mined.
In plain English, a cryptocurrency is a digital currency that a person can hold in their digital wallet. It is essentially a digital representation of value that can be stored and transferred virtually. It is a cash system that “is based on cryptographic proof rather than trust and allows two willing parties to transact directly with each other without the need for a trusted third party”.
The operation of a cryptocurrency is based on the use of a complex digital algorithm known as “blockchain”, which is an online database of cryptocurrencies that records all information, including the transactions made. Therefore, when any transaction/cryptocurrency exchange is done, the process Is recorded in a database (blockchain).
Unlike traditional currencies, cryptocurrencies are not backed by any country or government, so they are not considered legal tender in many jurisdictions. Cryptocurrencies are not issued by any affiliates and are not backed by collateral such as bullion. Also, while traditional currencies can be stored virtually (in online accounts, wallets, etc.), cryptocurrencies cannot be stored physically. Given the differences, regulating cryptocurrencies requires a holistic perspective compared to traditional forms of currency. Despite the limitations mentioned above, cryptocurrencies are widely traded internationally due to their potential high profits, resulting in the creation of wealth for traders. Cryptocurrency transactions work only on the economic principle of supply and demand. The higher the demand, the higher the price and vice versa. Interestingly, the price of bitcoin, which was $0.08 per bitcoin in 2010, is around $12,000 per bitcoin today. Therefore, traders see cryptocurrency as a viable investment through which they can significantly grow their money.
Legality Of Crypto Currencies
There has been a conflict of opinion about the legality of cryptocurrencies in various jurisdictions. Although many countries do not officially recognize the validity of cryptocurrencies (e.g. Argentina and Canada, cryptocurrencies are considered as money but not official legal tender), there are some countries where the trading of cryptocurrencies is allowed and the cryptocurrencies are accepted as legal tender.[4]
Currently, cryptocurrencies are not regulated in India. Historically, however, the Reserve Bank of India (RBI) and the Government of India have banned cryptocurrency trading. In its notification dated April 6, 2018 entitled ‘Ban on Trading in Virtual Currencies’[5] (and#039;Crypto Ban Notificationand#039;) all banks and financial institutions (and #039;regulated entities and#) 039;) related to crypto-currencies were prohibited. Provision of services.[6] In addition, the RBI has repeatedly issued warnings against investing in cryptocurrencies. According to the RBI, cryptocurrencies are “stateless digital currencies” that use cryptographic technologies for commerce and since these currencies operate independently of the central bank, they enjoy immunity from government interference. Thus, they could be widely used for illegal transactions.
In 2019, the Indian Revenue Service issued notices to residents dealing with cryptocurrencies. The notice included questions about crypto-trading and crypto-trading income that were not reported on residents’ tax returns.
While the cryptocurrency notification issue was pending in the Supreme Court, the finance ministry also introduced a bill titled “Cryptocurrency Prohibition and Official Digital Currency Act, 2019” (and#039;Biland #039;) which seeks to criminalize any cryptocurrency trading in India up to 250 euros with a fine and a fine of 1 million Indian rupees (about 3.4 million US dollars).[10] The bill has not yet been submitted to Parliament. It was also recently reported that the government is in talks with the Ministry of Law and Justice, the Ministry of Electronics and Information Technology and the RBI to introduce a legislative framework that would officially stop cryptocurrency trading in India. However, no official announcement has been made yet.
How Can Crypto Currency Trade Be Regulated
Although cryptocurrency is not regulated in India so far, the RBI has historically banned cryptocurrency trading and hence cryptocurrency stakeholders are in favor of cryptocurrency regulation. However, since currency is an inalienable part of the state and cryptocurrencies are invading this space, regulation of cryptocurrencies may be subject to strict regulations and supervision by various agencies, such as: (1) RBI regulates cryptocurrencies as legal tender. ; (2) to an enforcement agency for prohibiting the use of cryptocurrency in financial crimes; (3) the Ministry of Economy, regarding the intervention of cryptocurrencies in the economic policy of the government; (4) the Securities and Exchange Board of India (SEBI) for the use of cryptocurrencies in security contracts; and (5) Indian tax authorities on the tax implications of cryptocurrency trading. Therefore, the Indian parliament may have a daunting task of creating a strong framework to regulate all aspects of cryptocurrency trading. Some important aspects, such as the anonymity of users and the inability to trace crypto transactions, also pose a serious threat to the security of state interests and must be addressed.
RBI can rely on blockchain infrastructure to establish a regulatory presence in the crypto space. It may also consider granting licenses to crypto exchanges, which can only be granted after a proper review of documents and after meeting the necessary compliance requirements. A framework may also be introduced which, inter alia, provides for submission of transaction information to the RBI within a specified period. This not only ensures transaction security and minimizes illegal use, but also improves customer protection.
Is Crypto Currency Legal In India?
In India, there is no central authority to regulate the use of cryptocurrencies as a means of payment. When dealing with cryptocurrencies, there are no established standards or rules for conflict resolution. Cryptocurrencies are therefore traded at the risk of the investors.
Crypto Tax In India
One of the most confusing topics in India is cryptocurrency taxation. Initially, neither the Indian Income Tax Act nor the Goods and Services Tax (GST) defined cryptocurrencies. The Finance Minister has announced the tax structure of virtual or digital assets, including cryptocurrencies, in the results of the Union Budget 2022.
AUTHOR:- KAKUL SINGH, a Student of BANASTHALI VIDYAPITH
