CRYPTOCURRENCY BILL IN INDIA Separately, the government is working on legislation to regulate cryptocurrencies, but no draft has yet been. Cryptocurrency is not legal tender in India. While cryptocurrency in India can be exchanged due to the absence of a robust regulatory framework, a protracted. Notably, the Cryptocurrency and Regulation of Official Digital Currency Bill – which could simultaneously ban private crypto operators and. UP BTC 2018 MERIT LIST
According to the Lok Sabha bulletin dated November 23, , the Bill seeks ' to create a facilitative framework for creation of the official digital currency to be issued by the Reserve Bank of India. The Bill also seeks to prohibit all private cryptocurrencies in India; however, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses'.
Historically, currencies were devised as means to replace the barter system. Currencies that we use in our regular life are also known as "fiat currencies" since they are backed by a convertible or a commodity. In simple terms, the currency that we use is issued by the Government and is a promissory note issued by the Government promising to pay the bearer the amount specified on the currency.
VCs are basically a collection of binary data, which is stored using cryptography to secure the transaction records. VCs are not fiat currencies and are not backed by the Government. VCs are based on the concept of decentralised control and have no single authority regulating its issuance.
VCs do not exist physically. They are distributed over a vast network of computers. Unlike regular currencies, VCs have a limit. Thus, as the demand for VCs increase, so does its value. It works on the principle of demand and supply. VCs also have the advantage of eliminating third party merchants such as Visa or Master Card and therefore an end user does not have to pay commission, bringing down the transaction cost. They are also irreversible.
So, if a transaction is carried out, it cannot be reversed. The VCs are stored in a digital wallet, which can only be accessed by a private key. It is like an unbreakable vault, which can only be opened with the set of keys provided. If you lose the key, you lose the contents in the vault. However, the most vocal advantages of VCs are that they can be "mined" by a computer that involves a process of solving arithmetical problems or algorithms, which are used to verify transaction blocks to be added to the blockchain.
As stated earlier, VCs are secured by blockchain, which is an ever-growing list of transactions. One can use a computer to validate these transactions and, as a reward, receive a cryptocurrency. If VCs have so many benefits, then why are the Governments sceptical of considering them as legal tender? The short answer is privacy. VCs are based on blockchain technology, which is highly secure. A wallet is linked to a private key rather than an individual person. Therefore, the Governments find it challenging to trace the origin of a transaction.
Because VCs use pseudonyms to carry out transactions, it has the potential of being used for illegal activities. Another concern is that since VCs are not backed by Government or any commodity and therefore can lose their values if the promoter of the VCs stops trading activity. Reserve Bank of India. It was held by the Supreme Court in the aforementioned case that 'The position as on date is that VCs are not banned, but the trading in VCs and the functioning of VC exchanges are sent to comatose by the impugned Circular by disconnecting their lifeline namely, the interface with the regular banking sector.
What is worse is that this has been done i despite RBI not finding anything wrong about the way in which these exchanges function and ii despite the fact that VCs are not banned'. Following the judgement of the Supreme Court, the RBI issued a follow up circular dated May 31, 5 wherein it stated that in light of the Supreme Court's decision, the Circular was no longer valid and directed entities regulated by it not to rely on the Circular.
It is also relevant to note that the SC Garg Committee " Committee " in , led the charge to ban VCs, the Committee put forth its concerns regarding the ballooning of VCs in its report 6 and stated that nearly all VCs are issued abroad with huge numbers of people in India investing in them.
The report stated that, "All these cryptocurrencies have been created by non-sovereigns and are in this sense entirely private enterprises and there is no underlying intrinsic value of these private cryptocurrencies due to which they lack all the attributes of a currency. According to the Committee's report, VCs will not be able to act as a currency since VCs are not consistent with the essential features of currency, it further recommended that the government keep an open mind regarding an official digital currency.
The Committee as well as the RBI are of the view that VCs stand the risk of being misused for the purposes of money laundering and have long been regarded as volatile and unsafe investments by the RBI. The proposed Bill may ideally serve to introduce a level of uniformity of understanding and serve to bring the various government agencies involved onto the same page while also providing security and helping regulate the otherwise unregulated markets and prevent its misuse.
However, on the surface the Bill seems to be very restrictive in nature as it seeks to ban all private cryptocurrencies including mining and trading therein. The Bill further seeks to promote the 'official digital currency' that is to be issued by the Central Government and the RBI. Further, the penalties prescribed under the Bill seem to be disproportionately harsher when compared with similar economic offences.
The question now is whether banning all private VCs and having a single regulated 'official digital currency' defeats the purpose of VCs in general or is justified given the volatility as well as the potential for misuse. The fact of the matter remains that, as with any other system, there exists an inherent risk. Considering the benefits of VCs, a better approach may have been to regulate rather than ban.
Countries like Canada regulate VCs under their money laundering laws 7 , trading in VCs is permitted on an open exchange and the revenue generated is taxed under their income tax laws 8 , VCs are also used to avail products and services. Further, Japan permits the use of VCs as payment systems 9. In India, the Crypto trading platforms are witnessing a substantial jump in volumes. If properly regulated, the Government can tax the revenue generated, which can be a win-win situation for both the Government as well as investors.
While there are genuine concerns over the usage of VCs, regulation rather than prohibition could be a more viable option in India and embracing VCs may have served as a way for India to lead the way into the future. Report of the Committee to propose specific actions to be taken in relation to Virtual Currencies February 28, Payment Services Act, Act No. The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
Blockchain that is the underlying technology of the popular cryptoasset Bitcoin is a type of DLT which is based on verifying and adding transactions on a block. Across the globe, the regulatory response to cryptoassets has been varied. While there are countries such as China that has banned the use of cryptoassets, there is El Salvador which has recognized bitcoin as a legal tender.
However, predominantly a balanced approach has been undertaken by most jurisdictions. This approach towards regulation has been categorised under three groups in the Report:. Reliance on existing laws: Regulators rely on existing laws mostly securities law to clarify their applicability to certain types of cryptoassets, primarily security tokens issued during an initial coin offering.
Amendment to existing laws: Regulators amend existing laws mostly anti-money laundering laws to bring cryptoasset related services within its ambit. Enacting a Standalone Law: A new standalone law is enacted to regulate cryptoassets.
Previously, Malta and Thailand have also enacted standalone frameworks for cryptoassets in Some countries are also adopting a phased approach in regulation wherein they are focusing on regulating cryptoassets that are presently the dominant use case in such jurisdictions. Specifically, jurisdictions such as Hong Kong , the United States of America and the United Kingdom are focussing on developing regulations for stablecoins, which is the prevalent use case presently in such countries.
This Report examines how regulation over banning would be more effective in addressing the issues posed by cryptoassets. In regulating cryptoassets, the Report analyses two approaches: reliance on existing laws to regulate the cryptoasset sector, and enacting a standalone law.
On the basis of this analysis, the Report recommends that the most viable and effective solution would be to formulate a standalone law to regulate cryptoassets. The key recommendations of the Report are set out below:. The Proposed Law should regulate issuers of cryptoassets and entities providing cryptoasset related services as defined under the law. RBI will be responsible for regulating the former category of cryptoassets and SEBI will be responsible for the latter category.
SEBI will be responsible to regulate cryptoasset service providers. RBI will also be empowered to designate significant cryptoassets and significant cryptoasset service providers that may pose systemic risks.
Once designated, such cryptoassets and service providers will be subject to stringent oversight of RBI. Cryptoasset service providers will be required to obtain authorisation from SEBI to provide services. They will also be subject to requirements relating to communications with investors, customer due diligence, investor protection, prevention of market abuse, etc. It also contemplates the setting up of a self-regulatory organisation of cryptoasset service providers to focus on issues such as cyber security.
Along with the Proposed Law, India must also focus on investment in creating a specialised task force consisting of skilled officers for enforcing the provisions of the law, investment in investor education and also fostering partnerships with other countries for effectively regulating cryptoassets.
Views are personal. This edited excerpt from a report published by Vidhi Centre for Legal Policy has been published with permission from the institute. You can read the full report here. India needs free, fair, non-hyphenated and questioning journalism even more as it faces multiple crises. But the news media is in a crisis of its own.
There have been brutal layoffs and pay-cuts. The best of journalism is shrinking, yielding to crude prime-time spectacle.
All why ethereum over bitcoin amusing opinion
BCH CRYPTOCURRENCY NEWS
After the ruling, financial houses across the Asian country still refused to provide their services to crypto exchanges despite the removal of the Bitcoin regulation. In light of this development, RBI has clarified its statement on the removal of the ban staying that banks are allowed to work with individuals and crypto exchanges that their service. Exactly two years ago, Reserve Bank of India released a memo that went out to all crypto trading individuals and exchanges that it has banned all digital activities in the country.
The RBI said that financial houses were prohibited from working with crypto-related activities which further dampened the hopes on the adoption of the crypto across the country. When the regulation on crypto was shelved, analysts and the crypto community were overjoyed at the new while voicing their support for the move. After the ban was lifted, many crypto outfits were eager to return back to offer services to their customers but were met with a stumbling block when banks refused to offer them services.
To seek clear information on the new development, BV Harish, co-founder of Unocoin filed a petition to the RBI on their stance on the Bitcoin regulation. It was then the RBI clarified information and sent it out to respective banks in the country.
The Indian government has decided to tap into the regulation opportunities of Bitcoin, despite the criticism from a number of Indian politicians. One of the members of parliament of the ruling BJP in India, Kirit Somaiya, has been expressing his doubts in relation to the Bitcoin legality in India.
Once, Mr. Somaiya has called a Bitcoin a Ponzi scheme. However, he was later criticized for the inability to understand the essential differences between Ponzi scheme and Bitcoin. Despite the myriad of negative comments from some of the Indian politicians, the Indian government has considered the fundamental change in India Bitcoin regulation. The officials have come to a decision to regulate the cryptocurrency market and offer the platform for Bitcoin exchanges.
The India Bitcoin regulation is aiming to standardize the digital currency market and industry within the country. Yesterday, the local online reports have announced that the Indian government committee has ruled in favor of India Bitcoin regulation. Indian authorities are now establishing a special group for creating the regulatory framework for the Bitcoin.
India Bitcoin regulation will allow for the full legalization of Bitcoin in the short-term. Market experts believe that the Indian Bitcoin legalization will further fuel the trading volumes of Bitcoin.
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