Cryptocurrency in India and its Legal Aspect
Introduction
A cryptocurrency is a digital medium of exchange that relies on a decentralized network that facilitates peer‐to‐peer exchange of transactions secured by public‐key cryptography. In early 2009, an anonymous programmer or a group of programmers under the alias Satoshi Nakamoto introduced Bitcoin. Cryptocurrency is a new type of currency that uses a system of cryptography to verify transactions and exchange transactions. With the appearance of Bitcoin in 2008, the first decentralized digital currency was introduced by a person named Satoshi Nakamoto, digital forms of money certainly emerged around the world.
Legal Aspect of Cryptocurrency in India
In 2018’s Union Budget statement, Finance Minister Shri Arun Jaitley said that cryptocurrency is not a legal tender in India, and the government will take steps towards eliminating the usage of cryptocurrency in financial and payment systems. Although he said that the government will explore his underlying blockchain technology. Any company or individual involved in the digital asset trade was prohibited from the bank by RBI.
Internet and Mobile Association of India (IMAI) filed a written petition to the Supreme Court on 15 May 2018 entitled the Internet and Mobile Association of India v. Reserve Bank of India (2020 SCC Online SC 275).
On 4 March 2020, the Supreme Court lifted the ban imposed on 6 April 2018 by the RBI in this case which prohibited its regulated entities, such as banks, from trading in or easing banking transactions in virtual currency exchange. Afterward, the RBI published IAMAI ‘s circular request, shareholders of crypto-asset trading platforms, and real crypto-asset traders who were the petitioners submitted before the SC. A three-judge Bench of the Supreme Court of India drafted a Reserve Bank of India curriculum,2018 which sought to prohibit banks and institutions from trading in ‘virtual currencies’ — often referred to as cryptocurrencies, such as Bitcoin — and to provide services to those engaged in trading in such currencies. The court order comes seven months after an inter-ministerial committee proposed banning cryptocurrencies, recommending instead to introduce an official digital currency in the region.
In the Union budget 2022, Finance Minister Nirmala Sitaraman said any income from the transfer of any virtual digital asset shall be taxed at 30% (the country’s highest taxation par with gambling winning) with no deduction and exemptions allowed, also loss from the transfer of such asset cannot be set off against any other income they will 1% taxed deduction at source on such transaction and gift of such asset will also be taxed.
Cryptocurrencies Advantages and Disadvantages in India
The Union Government has recently considered a ban on private cryptocurrencies in a new bill, “Cryptocurrency and Official Digital Currency Bill Regulations”, 2020 (Cryptocurrency Bill 2021). Implementation of cryptocurrency is via blockchain so the verification method will also be transparent. However, some challenges may be faced by India related to cryptocurrencies. One of those is identifying illegal transactions. The number of trades currently executed over cryptocurrencies has increased with the growing popularity of cryptocurrency in India it can bring benefits to India for better legal environment and regulation. It can help in developing new technology that can create new jobs.
Conclusion
Globally cryptocurrency can be considered as ‘goods’ that can be transferred purchased or sold anywhere in India and globally easily. Although there are a variety of risks involved with virtual currency its permanent transparency still attracts billions of dollars in investments. The growing popularity of cryptocurrency in India can bring benefits to India with a legal environment and regulation where the Indian government can regulate this digital virtual currency in a way forward for a profitable and productive economic system for a better future.
References:-
Dr Afzalur Rahman, M. K. (2018). Legal Status of Crypto Currency in India: A critical review. International Journal of Engineering & Technology
Deshant S Thakur, Prof. R.A. Varma, Prof. Damodar M Hake (2022).Regulation of Cryptocurrency in India: Issues and Challenges. Journal of Positive School Psychology
Author: Arti Kumari,2nd year LL.B., Allahabad University
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