From mobile banking to online stock exchange sites, cryptocurrency is unquestionably the most desired Virtual Currencies (“VCs”) such as Bitcoin, Ethereum, and others have grown in popularity in recent years – including globally and in India. According to WazirX, Unocoin, and CoinDCX, India’s three largest crypto-exchanges, there are between 60 lakhs and one crore cryptocurrency investors in India, with deposits worth over Rs 10,000 crore.
WHAT ARE CRYPTOCURRENCY AND CRYPTO TRADING?
A cryptocurrency is a form of digital money that is not controlled by a government, is decentralized (“peer to peer”), and is focused on open-source software. Based on cryptography technologies, open-source software offers a forum for consumers to create their own private currency and make purchases in it without having to deal with banks or central banks. Blockchain is the infrastructure that characterizes bitcoin and, in essence, allows it to function.
In January 2021, the Indian government’s Ministry of Electronics and Information Technology (MEITY) drafted the National Strategy on Blockchain, which defines Blockchain as a distributed ledger technology ideal for decentralized and transactional data exchanged across a wide network of untrusted entities.
The act of speculating on cryptocurrency price fluctuations via a CFD trading account or acquiring and selling the underlying coins via an exchange is known as cryptocurrency trading.
You’re essentially buying the coins when you buy cryptocurrencies on an exchange. To begin a position, you’ll need to open an exchange account, deposit the full amount of the asset, and keep the cryptocurrency tokens in your own wallet until you’re ready to sell.
VALIDITY IN INDIA
The Reserve Bank of India (RBI )has released a series of cautionary or prohibitory circulars, demonstrating India’s hesitation. In addition, an Inter-Ministerial Committee was created, which proposed two bills that were fundamentally opposed to one another. Money laundering, terror finance, hacking, and bribery are all high risks, according to the RBI.
In contrast to previous RBI circulars and Inter-Ministerial Committee bills, the Hon’ble Supreme Court issued a landmark judgment in 2020 that investigated and interpreted the issue, providing a pro-cryptocurrency viewpoint. It is important to comprehend the timeline of events in order to decide how they interact with what the future brings.
The first instance of caution against cryptocurrencies dates back to December 24, 2013, when the RBI issued a press release warning consumers, investors, and traders of virtual currencies (VCs), such as Bitcoins, litecoins, bbqcoins, and dogecoins, among others, about the possible financial, operational, legal, consumer privacy, and security threats they face. Additionally, on February 1, 2017, and December 5, 2017, RBI issued two cautionary press releases, in which it reaffirmed the risks and explained that it has not granted any license or authority to any person or corporation to run schemes or deal with Bitcoin or other VCs.
JUDGEMENT BY SUPREME COURT
The ban levied by the RBI Circular was lifted by the Hon’ble Supreme Court on March 4, 2020, in Internet and Mobile Association of India V. Reserve Bank of India, Justices Rohinton Nariman, Aniruddha Bose, and V. Ramasubramanian make up a three-judge bench. The court looked at the case primarily from the context of Article 19(1)(g) of the Indian Constitution, which is the right to exercise any profession or practice any occupation, trade, or service, and the proportionality doctrine.
CRYPTOCURRENCY AND REGULATION OF OFFICIAL DIGITAL CURRENCY BILL, 2021
In the upcoming Lok Sabha session, the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, is anticipated to be introduced. The New Bill aims to create a more suitable environment for the development of the RBI’s official digital currency. In addition, the New Bill aims to outlaw all private cryptocurrencies in India. It does, however, qualify for certain exceptions.
It is essential to consider the cryptocurrency has gained worldwide traction. Bitcoin’s value risen in 2020, prompting several new buyers to express strong interest in it. Tesla’s 1.5 billion dollar investment in Bitcoin, as well as their announcement that it will be accepted as a form of payment, added to the momentum. Coinbase, a digital currency exchange headquartered in the United States, has announced its public offering. As a result, it’s critical to consider whether a ban is the best way to prevent cryptocurrency from being misused, particularly given recent global developments in the field.
It’s worth noting that the MEITY’s Draft National Strategy on Blockchain, 2021, highlights the benefits of cryptocurrencies. According to the study, blockchain technology offers confidentiality, stability, and reliability in business processes, as well as a special layer of trust over the Internet, which was first tried for cryptocurrency use, Bitcoin.
The cryptocurrency was also identified as one of the Blockchain’s possible implementations. As a result, there is a need for Indian authorities to take a united stance on this issue. The RBI’s practices are clearly not in line with MEITY’s findings.
Since we live in a generation where technological advancements are unavoidable, each one will invariably bring with it new threats. It is important to keep updating the legislation in order to keep it up to date with recent trends. As the Supreme Court found out in its judgment, there must be strong evidence to prove the prohibition and show that it is necessary – otherwise, there is a good chance that the right was given under 19(1)(g) will be cited again in a slew of lawsuits. As a result, the aim of any new legislation should be to avoid the risks associated with VCs by effective reinsurance.