Legal status of virtual currencies in India
India has no central authority to regulate virtual currencies. However, Nirmala Sitharaman’s proposal to tax digital assets has strengthened the legality of these currencies in India. Let us reveal the details of cryptocurrencies and their regulatory status in India step by step:
Not Legal Tender
Virtual currencies such as Bitcoin are not recognized as legal tender in India. The RBI has already clarified that cryptocurrencies have no official support in India and are not regulated by any government agency.
RBI Circular (2018)
In 2018, the Reserve Bank of India prohibited banks from providing services to individuals or companies dealing in virtual currencies. This circular caused confusion in India’s crypto sphere as it made it difficult for people to exchange cryptocurrencies into fiat currencies.
Cryptocurrency Supreme Court
In 2020, the Supreme Court of India discussed the RBI circular and called it disproportionate and unconstitutional. This landmark ruling brings some relief to the crypto industry and paves the way for the resumption of crypto trading and investment.
There are no specific regulations for virtual currencies
Although virtual currencies are not illegal in India, there are no specific laws or regulatory mechanisms governing the use of VDAs. This creates challenges and uncertainty for businesses and investors.
Proposed Cryptocurrency Regulation Bill
In 2021, the Government of India will introduce a Cryptocurrency Regulation Bill that aims to ban all private virtual currencies and provide a framework for the creation of an RBI-issued CBDC. Did. This bill has not yet been passed and is still being debated.
States of India on Cryptocurrency
states of India such as Telangana and Karnataka are considering blockchain technology and have expressed interest.
RBI and Cryptocurrency
The Reserve Bank of India, the central bank, has taken some restrictive measures regarding cryptocurrencies.
Circular 2018
In 2018, RBI issued a circular prohibiting banks from providing services to individuals and businesses dealing in virtual currencies. These included concerns about investor protection, market integrity, and money laundering. Therefore, it has been difficult to convert cryptocurrencies into fiat currencies.
However, this circular was struck down by the Supreme Court in 2020. The Supreme Court said the RBI’s decision to prohibit banks from providing virtual currency-related services to businesses lacks proper basis. The ruling has given a boost to India’s crypto industry.
Warning
The RBI has consistently raised concerns about the risks associated with these virtual currencies. The company has issued multiple public notices warning the public about the potential pitfalls of investing in cryptocurrencies.
Image of CDBC
The RBI has always shown interest in considering the development and issuance of a central bank digital currency. Pilot projects and studies are being conducted to determine the potential benefits of implementing a digital rupee.
However, the RBI’s stance on the use of blockchain technology has been nothing but positive. In January 2024, RBI Governor Shaktikanta Das stated that the crypto βpartyβ is a threat to emerging markets. This means that the RBI’s long-held belief that cryptocurrencies pose a serious threat to monetary stability and could be the cause of the next major global financial crisis remains intact.