Indian Government Mounting Law, To Ban Cryptocurrency Trade:

By Ritwik

In 2018, the RBI forbidden planned entities from providing services to any individual or business dealing in digital currencies. Exercising its powers conferred by the Reserve Bank of India Act, 1934 and The Payment Settlement Systems Act, 2007 by issuing a circular directing the entities:

  • not to deal in cryptocurrencies nor to deliver services for enabling any person or entity in dealing with or settling virtual currencies;
  • to exit the associations with such persons or entities, if they were already providing such services to them. Hence, while not explicitly banning virtual currencies, it efficiently put an end to their usage by cutting off the relationship between crypto-exchange providers & the economic market in India.

But the circular was quashed by the Supreme Court in March 2020 (The Court found that a blanket ban was disproportionate and that virtual currencies had caused no visible damage to banks regulated by the RBI. The judgment offers clarity and hope for more balanced regulation in the future.) The government is aiming to bring in a law to ban trade in cryptocurrency, sources have told, a move that may come as a massive disappointment to an industry that has been booming during the lockdown. The Supreme Court in March 2020 had set aside a Reserve Bank of India’s circular that forbidden the banks & financial institutions from providing services associated with cryptocurrencies. Indian & overseas cryptocurrency majors have been waiting for clearance from the government or the RBI on digital tenders:

“There was a view in the government that banning it through a law would be more binding. It will clearly define the illegality of the trade. We have forwarded a note to related ministries for inter-ministerial discussions,

as told by a government official, the government has been having consultations with law ministry, ministry of information & technology & the RBI for a framework of a law that may officially finish trading in cryptocurrency in India, the official held:

“We are working on it. After inter-ministerial consultations, it (the note) would be presented to the cabinet for approval. Once Parliament resumes for the session, we are hoping to get it ratified,

In 2018, the RBI forbidden regulated entities from providing services to any individual or business trade in digital currencies like bitcoin. Quashing the RBI circular, the Supreme Court had held citizens had the right to create a new industry of cryptocurrencies & exchanges with the fundamental right to trade. The government had made a panel led by then finance secretary Subhash Garg in the year 2017 to study the ecosystem of cryptocurrencies.

The memorandum would be sent to the cabinet after consultations and, subsequently, to Parliament. If it is along similar lines as an earlier proposal the law will deal a blow to investors, exchanges and other entities dealing in virtual currencies such as bitcoin, experts said.

A high-level government panel, in July 2019, prepared a draft law providing for a ban on all forms of private cryptocurrencies. It suggested fine of up to Rs 25 crore and imprisonment of up to 10 years for anyone dealing in them. In its report, the panel wished-for a ban on all forms of private virtual currencies. Nevertheless, it also asked the RBI & the government to look at the possibility of official virtual currency. The income tax department allotted notices to 500,000 investors, transporting the platforms, which are trading in virtual currencies under the scanner or are private. The notices asked if the taxes had been paid on the rise in assessments after an upsurge in values. The indirect tax department, as well, issued notices to the exchanges & asked for explanations that if they were giving cryptocurrencies as the supply of goods or services & if they were paying Goods & Services Tax.

Millions of dollars’ worth of business in cryptocurrency are being done every week, with the lockdown pushing up the volumes. The government, industry insiders, held, was losing out on valuable revenue by not coming up with a monitoring mechanism. A growing quantity of investors has found refuge in virtual currencies as traditional assets have taken a thrashing over fears about the health of the economy battered by the coronavirus outbreak.

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