Cryptocurrency is a digital currency that uses encryption to secure transactions and verify them on a public ledger. It is independent of any government or bank control and is created and managed by a decentralised system of users who use a special system called blockchain to keep track of all the transactions and make sure they are secure. Cryptocurrency is a highly debated and controversial topic in India and its legal status is like a riddle without a clear answer. Currently, there is no specific law or regulation that governs the use or trade of cryptocurrency in India.
Overview Of Cryptocurrency Regulations in India
2018: The RBI banned banks and other financial institutions from dealing with cryptocurrencies.
2019: An inter-ministerial committee (IMC) set up by the government of India submitted a draft bill to ban cryptocurrencies in India. The draft bill said that only the RBI or the government could issue or approve cryptocurrencies in India. The draft bill also said that anyone who mined, held, sold, issued, transferred, or used cryptocurrencies in India would be penalties of fines, imprisonment up to 10 years, or both. However, the draft bill was never passed into law.
2020: The RBI’s ban was challenged in the Supreme Court of India, which struck down the circular as unconstitutional and disproportionate. The Supreme Court said that the RBI had no authority to ban cryptocurrencies and that it did not show any empirical evidence of harm caused by cryptocurrency to the banking system or the economy.
2021: The government of India listed a new bill to regulate cryptocurrencies in India. The new bill titled “The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021″in the agenda of the budget session of the parliament. However, the details and contents of the new bill are still unknown, and it is not clear if it is similar or different from the draft bill of 2019. The new bill has not been introduced or debated in the parliament yet, and its future and timeline are uncertain.
2022: In the 2022 Budget, the government of India gave some clarity on how cryptocurrencies would be taxed in India. The new crypto tax said that anyone who made profits from cryptocurrencies would have to pay 30% tax on their earnings and a 1% tax deducted at source. The stated purpose of the tax was to monitor and regulate the crypto market and to prevent money laundering, fraud, and other illegal activities.
Future Prospects and Regulatory Trends
The cryptocurrency market in India has been expanding rapidly in recent years. According to a report by Business Today, over 7 million Indians have invested more than $1 billion in cryptocurrencies. Additionally, data from NASSCOM indicates that Web3 investments in India since 2020 amount to over US$1.3 billion. However, uncertainty surrounding the legality and regulations of this field has caused concern among its stakeholders in the cryptocurrency space. It would be beneficial if the Indian government could establish unambiguous regulations soon to clear confusion and positively leverage this emerging space.
Done By: Adithya Menon, 5th year B.A, LL.B(Hons.)
Veltech School of Law, Chennai
For Origin Law Labs
