Congratulations! Now we can trade with Cryptocurrencies in India, and we have the Supreme Court of India to thank for it.
What is a cryptocurrency?
It is a type of Virtual Currency created to function as a medium of exchange. It uses cryptography to control each cryptocurrency through a distributed ledger technology called the Blockchain. Examples include Bitcoin, Ethereum, Ripple, etc.
Its legality-
· Unlike the Petro by Venezuela and Alber by UAE and Saudi Arabia, cryptocurrencies are not a legal tender in India.
· In a 2018 circular, the Reserve Bank of India directed all the regulating entities in the country including banks, to stop dealing with individuals and businesses involved in virtual currencies.
· The grounds laid forth were clear that these had no underlying Fiat {Fiat currency is any currency established by a Government decree with no intrinsic value of its own}.
· Supreme Court of India in a recent judgment set aside this ban by the RBI.
· According to the judgment, the ban did not pass the Proportionality test.
· The Test of Proportionality says that any action by the Government must pass the test mentioned in Article 19 (1) (g) of the Indian Constitution which states that “All citizens will have the right to practice any profession, or carry on any occupation or trade and business”.
· Hence, as of date, in Indian context, trade in Cryptocurrencies is Legal but, it is not a Fiat i.e. it’s not a legal tender.
Implications-
· This decision implies that cryptocurrencies can now be bought and sold in India like a digital commodity.
· Mining of cryptocurrencies is no more illegal.
· Also, the earnings from it would be taxable. If you have held it for less than one year, then the tax would be on lines with income tax, but, if you have held it for more than a year, then it is taxed under the Long-term Capital Gains Tax {and thus, it shall be under government vigil}.
· Moreover, individuals and institutions can purchase cryptocurrencies by using the means of credit or debit cards, or even cash in some cases when the amount is low.
· Its use in election funding and government transactions isn’t yet clearly determined on the backdrop of its volatility and lack of government backing.
· It is in line with the Global Approach: regulation but not entire ban on the new technologies.
· The Draft Law by Centre shall consider the suggestions by the Supreme Court Judgment.
· Blurring boundaries between Fiat and non-Fiat currencies.
· Setting up on India’s 1st Bitcoin ATM in Bengaluru which allows customers to transact with as many as 24 forms of cryptocurrencies using a proper verification channel.
· Perhaps there would be an integration of Virtual Currencies into the National Policy of Software Products, 2019.
For India to step into the future of technology, the regulation of Cryptocurrencies is the way. If there is a complete ban, then some might try and find their way around the ban leading to money laundering, drug dealing, arms supplies etc. according to the Financial Action Task Force. Removal of this ban can also lead the World into futuristic banking.
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