Comparative study Between India and other Nations on the regulation of virtual currency, By Kartikeya Hundet, At Lexcliq

Law to Governs use of Virtual Currency in International Community 

The virtual currency in the form of cryptocurrencies must be used and classified as private money of individual users, and within a group of users treated as community currency. In most of the world countries it is legally allowed to make any payment transactions in cryptocurrencies i.e., the users are not prohibited by law to make such payments. Therefore, the nations such as Japan, Germany, Italy, Singapore, Switzerland and Canada[1] have enacted specific statutes that regulate it under anti-money laundering provisions to adopt the cryptocurrency. Cryptocurrencies are not recognized as legal tender by the various nations. Further, the countries like Japan[2] and Italy have accepted the transaction of it as a form of payment and also made rules that treat such currency separately from the legal tender in any means of exchange.  

On the other hand, there are other countries such as China, Taiwan, Iceland and Saudi Arabia had specific legislation which strictly prohibited any uses of cryptocurrency in their territory. This technology of cryptocurrency has been around for nearly a decade, yet it still operates in older traditional ways and uncharted legal territory as it is difficult to fit it under one solid definition and limit its scope of function moreover, the existing laws that are tasked with regulating the crypto-currency or bitcoin were written before its inception and are unfit to cope with its use and understanding to regulate it effectively.

Indian Court and Government stand on cryptocurrency

India, which has one of the largest numbers of internet users in the world, certainly requires some changes in the current legal statute against the risk of the users’ data security. the virtual currencies have different legal elements to be highlighted in the statutes to govern. The cryptocurrencies raise numerous legal issues with the effect that their users are exposed to significant legal risk and leak of their data security. as cryptocurrency has various fields of finance, technology and law since it originates and has been difficult to regulate the use of this technology in a lawful manner. However, the function of cryptocurrencies in India, compared to many other countries, currently has no specific statutes and no legal framework in place and is unregulated.

The concept of virtual currency has not been recognized by the Reserve Bank of India (RBI), as a legal fiat currency in India, although RBI does have the power to include virtual currency within the definition of fiat currency to circulate throughout the county. Currently, creation, trading, or cryptocurrency usage, as a medium of payment, is not authorized by RBI or any other monetary authority in India.

The government formed a special inter-ministerial Committee on February 28 of 2019, and later on, released a report recommending certain measures concerning the use of cryptocurrencies in India. The recommendation included a complete ban on private cryptocurrencies. This committee had also prepared a draft bill known as Cryptocurrency and Regulation of Official Digital Currency Bill, 2021.

Furthermore, the Supreme court of India in Writ filed against the notification issued by the RBI for banning private party use of cryptocurrencies[1]. The judiciary examines various issues raised on the use of virtual currency for the payment of transaction amounts. The court gives a rather pro-cryptocurrency perspective as opposed to all the previous RBI notification and Inter-Ministerial Committee bills suggestion. Therefore, the need for a holistic law on cryptocurrency is stressed upon along with recommendations drawn from the international framework and the overall need for cryptocurrency laws in India.  

 

[1] Proceeds of Crime (Money Laundering) and Terrorist Financing Act [S.C. 2000, c. 17], Government of Canada

[2] Payment Services Act, [Act No. 59 of 2009], Government of Japan.

[3] Internet and Mobile Association of India v Reserve Bank of India [2018] WP (Civil) No.528 of 2018

 

 

 

 

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