Decoding Cryptocurrency Regulations in India

You may have stumbled upon multiple news reports about various international governments putting in their best efforts in drafting new policies and procedures to regulate the flow of cryptocurrency, the new virtual currency system.

Cryptocurrency Legal and Regulatory Frameworks in India

The Reserve Bank of India’s quick press note on April 2018 termed the Cryptocurrency as not a legal tender. It went on to ban banks and any regulated financial institutions from “dealing with or settling virtual currencies”. Apart from this, there doesn’t seem to be any major policy level activities in India. Such as setting up discussion forums with various stakeholders, reaching out to the startup community, awareness sessions on the pros and cons of the virtual currency system as a legal tender, etc.

Status of Virtual Currency Committee on Cryptocurrencies in India

In April 2017, the Department of Economic Affairs, Ministry of Finance, India, set up the Blockchain and Cryptocurrency Committee to examine the global regulatory and legal structures of digital currencies, including bitcoin. However, there is still no clarity on the regulation of cryptocurrencies in India. The supposed finance ministry panel to look into the Cryptocurrency and Blockchain is also unclear. The drafting of new legislation on Cryptocurrency is underway. The government must make the entire process transparent and involve various stakeholders including the public.

Cryptocurrency: Market Potential in India

The vast market potential around the Cryptocurrency eco-system is huge. It can increase revenue as well as job opportunities for millions. Indian government’s inaction and silence on this new technology should not become too late for the Indian startup community to build innovative technologies around the ecosystem when the government finally wakes up. However, the new legislation should have strong safeguards in protecting the public from cryptocurrency investments or trading, similar to the securities in India.

Cryptocurrency Issues

• Treatment with respect to Direct and Indirect taxation laws in India
• Treatment as security as per the SEBI laws
• AML/KYC Provisions
• International, cross-border transactions

Is Cryptocurrency legal or not?

RBI’s press note doesn’t help. Though not a legal tender, there’s no law against buying or selling of cryptocurrencies in India. This creates more confusion and chaos among the startup community. Recently, one of a prominent startup founder was arrested by Bengaluru police. The founder has allegedly installed an ATM machine for the Cryptocurrency. Although the founder denied any such sorts, this entire arrest episode could have been avoided if the government clarifies its position on the treatment of Cryptocurrency and its allied services.