Introduction :
Due to its decentralised structure and revolutionary features, cryptocurrencies have drawn interest from both investors and followers throughout the world. However, various nations have varied regulatory environments for cryptocurrencies. As the government and authorities struggle to strike a balance between investor protection and innovation, the regulation of cryptocurrencies in India has been accompanied by ambiguity. This article offers an overview of the present situation and looks at cryptocurrencies from a legal standpoint in India.
The RBI’s Circular and Its Impact :
The country’s central bank, the Reserve Bank of India (RBI), published a circular in April 2018 that forbade regulated firms from offering services to people or companies engaged in cryptocurrency trading. The circular basically forbade banks and other financial organisations from supporting transactions using cryptocurrencies. This action by the RBI posed serious problems for the Indian bitcoin market, resulting in the shutdown of multiple exchanges and inhibiting innovation.
Supreme Court’s Ruling and Its Impact :
The RBI’s circular was subject to legal challenges, which led to a historic ruling by the Indian Supreme Court in March 2020. The RBI circular was struck down by the Supreme Court because it was unlawful. The decision was a crucial turning point since it clarified the legal standing of cryptocurrencies in India and gave the sector new hope for growth.
Post-Supreme Court Ruling: Regulatory Developments :
The Indian government and authorities have moved to create a framework for cryptocurrencies in response to the Supreme Court’s decision. The Ministry of Corporate Affairs announced new rules in January 2021 that mandate businesses that trade in cryptocurrency must reveal their holdings in financial accounts. With this action, the government hoped to increase transparency and tighten its control over cryptocurrency-related activity.
Additionally, the country’s securities regulator, the Securities and Exchange Board of India (SEBI), has been debating whether to regulate cryptocurrencies as securities. To safeguard investors and stop fraudulent practises, SEBI has been looking at the possibility of implementing comprehensive laws to control initial coin offerings (ICOs) and other cryptocurrency-related fundraising activities.
Draft Bill: The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 :
Early in 2021, news of a measure that would both outlaw private cryptocurrencies in India and set up a framework for the formation of an official digital currency issued by the central bank surfaced. The government is presently reviewing the measure, which is known as the Cryptocurrency and Regulation of Official Digital Currency measure, 2021. If passed, it would outlaw all private cryptocurrencies and impose severe penalties on people and organisations engaged in their trade, mining, or ownership.
Industry Responses And Challenges :
Concerns have been raised by the cryptocurrency community and other stakeholders in the sector over the potential ban on cryptocurrency. Many contend that a complete prohibition may inhibit innovation and impede the expansion of the Indian blockchain ecosystem. However, the bill’s supporters feel that it is essential to safeguard investors and stop money laundering and other illegal acts.
The Way Forward :
In India, the proposed ban is still being debated, thus it’s unclear what the current legal situation is with cryptocurrencies. While voicing reservations about the uncontrolled nature of cryptocurrencies, the Indian government has been eager to explore the possibilities of blockchain technology. In order to shape the cryptocurrency environment in India, it would be essential to strike a balance between innovation and regulation.
Author: Shruti Gala
