Status Quo Cryptocurrency In India

Cryptographic currencies appeared due to technological progress and the evolution of money as a completely liquid medium of exchange. Indeed, originally money fulfilled the function of the exchange of goods. It was then assigned to gold as the universal equivalent. The next stage was the transition to paper money and now we have the emergence of electronic money (e-money).
The Indian central bank in 2018 effectively banned crypto transactions after a string of frauds. RBI asked all the regulative authorities to stop their dealing in any kind of private cryptocurrency effective immediately.
The Supreme court in March 2020 quashed the decision by RBI on grounds of disproportionality. The bench, headed by Justice Rohinton F Nariman, noted that RBI failed to show any concrete damages connecting the frauds and the crypto dealings.
Basically, cryptocurrency is a form of digital asset based on a network that is spread across large number of computers. This makes it a decentralized structure and out of the control of central authorities and financial institutions. The use of blockchain and ledger technology in some cryptos allows them to record information on every distributive network making it nearly impossible to counterfeit or double-spend.
The recent surge in the price of bitcoin has brought back the interest in cryptocurrency trading in India. The banks which stopped dealing in crypto have restarted their transactions. However, there have been reports of increase in frauds due to unregulated cryptocurrency ecosystem.
“The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021” is presently under review and will be tabled in the Parliament shortly. The finance minister’s comments on the bill indicates that there is not going to an absolute ban on private cryptocurrencies rather there maybe experimentation, exploration and encouragement of the emergent technology. The bill will introduce an officially digital currency CBDC (central bank digital currency) issued by RBI which will have the ability to improve financial inclusion and aggregate demand in emerging markets as well as the pace at which monetary policy is transmitted. A CBDC, according to the RBI, is a "mixed blessing" because it risks disintermediation of the banking system.
Risky as it may be, the government has recognised the potential effect of crypto in the present market. As of now some important target approaches of the bill are going to create a facilitative framework for an official digital currency and a legal structure for the regulation of private cryptocurrency by providing a limit on holding crypto after which liquidation will be made mandatory and penalties will be levied. Regulations will be made requiring corporates to disclose all dealings in cryptocurrencies and allowing corporations to report any profit or loss on crypto sales, holdings and investments in statutory reports with the Registrar of Companies.
As a matter of good regulatory governance, any legislative or regulatory prescription should be participative. Private cryptos can be tested in a controlled environment, such as a regulatory sandbox or RBI’s Innovation Hub. This will allow policymakers to examine and monitor crypto applications and provide an iterative learning process through which more robust regulations could evolve.
Japji
Student Editor
B.A., LLB-VI

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