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Legality of Cryptocurrency in India
Legality of Cryptocurrency in India
A cryptocurrency is a digital or virtual asset or currency that is secured by cryptography which make it nearly impossible to counterfeit. Cryptocurrency is based on a block chain technology i.e. distributed across a large number of computers. A highlighting feature of cryptocurrency is that they are generally not issued by any central authority. The decentralised structure theoretically makes them immune to the government interference and manipulation. Cryptocurrency can be sent between two parties. This is done by the use of private keys and public keys. This an be done with minimal charges thus getting rid of the steep charges charged by the conventional financial institutions.
On April 6, 2018, The Reserve Bank of India released a notification on ‘Prohibition on dealing Virtual Currencies’. The Reserve Bank of India notified that there are various risks in dealing with virtual currencues. Keeping in mind of the risks that virtual currency can cause, The Reserve Bank of India shall not deal with it. The Reserve Bank of India shall not even provide services which includes registering, trading, maintaining accounts, settling, clearing, giving loans against virtual tokens, accepting them as collateral, opening accounts of exchanges dealing with them and transfer / receipt of money in accounts relating to purchase/ sale of virtual currencies.
The Reserve Bank of India issued the notification in exercise of powers conferred by
- Section 35A read with Section 36(1)(a) and Section 56 of Banking Regulation Act, 1949,
- Section 45JA of the Reserve Bank of India Act, 1934,
- Section 45L of the Reserve Bank of India Act, 1934 and
- Section 10(2) read with Section 18 of Payment and Settlement Systems Act, 2007.
On March 4, 2020, Supreme Court of India lifted the ban on cryptocurrency. It was almost after 2 years that SC lifted the ban on cryptocurrency. Supreme court’s move was welcomed by all the individuals and organizations who had to shut their business due to the The Reserve Bank of India’s rule.
Cryptocurrency could be used to buy goods from online retailers; though not all merchants accept cryptocurrency, some retailers like NewEgg and overstock are known to accept it. People are also known to have used cryptocurrency as an investment like shares.
Cryptocurrency, as opposed to central banking systems, uses decentralized control. All confirmed peer-to-peer transactions of the cryptocurrencies are stored in a public ledger called Blockchain, which is a system that keeps an overview of cryptocurrency units and their ownership.
Some popular Cryptocurrencies in circulation are Bitcoin, Ethereum, LiteCoin, Ripple, Dash, Monero and so on. The move to uplift RBI ban may also encourage people to prefer Facebook’s very own cryptocurrency Libra, which was launched last year.
Meanwhile, RBI has filed a petition to review the judgement regarding the upliftment of cryptocurrency ban. The “Banning of Cryptocurrency and Regulation of Official Digital Currency Bill 2019” was submitted to the finance ministry in February last year. It was drafted by an inter-ministerial committee (IMC), headed by former Finance Secretary Subhash Chandra Garg. The committee was tasked with studying all aspects of cryptocurrency and providing recommendations for the country’s crypto policy. The bill was supposed to be introduced in the Parliament last winter, session. But it was not introduced as planned.
