Is Bitcoin illegal in India ?
Bitcoin is a popular Cryptocurrency. Cryptocurrency is a digital currency accepted globally. For example Indian currency is Rupee but Rupee is a physical currency accepted only in India but on the other hand bitcoin is accepted in every country and it is virtual money based on software not physical. Bitcoin is not regulated by a particular authority like Rupee is regulated by Indian government . There is no sole authority who regulate Bitcoin. It Allows users to spend money anonymously. When you purchase cryptocurrency, you purchase a digital asset based on an algorithm . The coins are created by users who “mine” them by lending computing power to verify other users’ transactions. They receive Bitcoins in exchange Cryptocurrency is virtual money based on software. It Uses encryption techniques to control the creation of monetary units and to verify the transfer of funds. It is like a file stored in a folder. Each Bitcoin is protected by a private key. This private key is same a ATM pin or UPI pin. But ATM pin or UPI pin can be regained with the help of bank but this is not the case with private key if someone lost the private key the Bitcoin gets destroyed. 25℅ of total Bitcoin has been lost till now due to lost of private key. Bitcoin network controls the bitcoin. Bitcoin network comprises the common man who uses bitcoin, and anybody can become a part of it. To understand this network, we must understand the Bitcoin Public Ledger.
Use of Bitcoin
It is used same as the currency . It can be purchased by money and it can also be use to purchase other commodities. Further we can sale Bitcoin for money if needed. Because of its limited quantity it is in high demand. Some people use it as a gambling instrument. You can buy a fraction of a Bitcoin. For instance, you can buy Bitcoin for Rs 100 or Rs 1,000.The transfer of this currency is like sending the e-mail or text message to a person. To send a bitcoin, a wallet app is used (app: ‘Bitcoin Wallet’), the amount to be sent is typed in the wallet app and type the details for the recipient( account number in this case), and you have sent the bitcoin which can later be converted to fiat currency.
History of Bitcoin
Bitcoin was invented in 2008 but no one knows about its inventor it is a Mistry till now that who had invented this it is anonymous that its inventor was a individual or a group. Some people consider that the concept of Bitcoin was introduced by Satoshi Nakamoto but he is missing since 2011. So no one knows the truth. Bitcoin was created as a way for people to send money over the internet. The digital currency was intended to provide an alternative payment system that would operate free of central control but otherwise be used just like traditional currencies.
Reasons behind its high value
Bitcoin has a growing base of users, merchants, and startups. As with all currency, bitcoin’s value comes only and directly from people willing to accept them as payment . It creates artificial scarcity, which ensures the digital money increases in value over time. Whereas government-issued currencies such as the Australian dollar can have their supply increased at will by central banks, Bitcoin has a fixed supply that can’t be inflated by political decisions. Like gold is in limited amount it is a scarce commodity in the same way Bitcoin is limited and extracted time to time. Total 18M Bitcoins are extracted till now. So the main reason behind its high value is high demand and less supply.
Mining means extracting metals or minerals in the same way Bitcoin mining is a process in which a miner solves a complicated mathematical equation and gain Bitcoin. In this way Bitcoins are generated and the process of generating Bitcoins is Bitcoin mining.
many people are still unaware of digital currencies and Bitcoin. It has volatility because there is a limited amount of coins (21 million bitcoins), and demand for them increases by each passing day. It is still at its infancy stage, with incomplete features that are in development.
Is it anonymous?
Transactions and accounts can be traced, but the account owners are not necessarily known. However, investigators might be able to track down the owners when bitcoins are converted to regular currency. But the people might be able to spend that money online and might be impossible to trace.
Bitcoin in India
In India about 1.5 million people are trading crypto while around 6 million are just holding it. Crypto in India is currently booming, the market has been thriving, and retail investors are adding to the fire with their enthusiasm. Cryptocurrencies are not illegal; anybody can buy, sell and trade cryptocurrencies. It’s unregulated; we do not have a regulatory framework to govern its functioning for now.
Legal position of Bitcoin in India
Reserve Bank of India (RBI) first issued its ban on banks’ dealings with crypto businesses back in April 2018 (the ‘order’), which took effect in July of that year 20183. The RBI notification was then challenged before the Supreme Court of India by the Internet & Mobile Association of India (IAMAI). The Court, whilst deciding the matter, looked at the draft bill which has been proposed (but not passed) by the legislature, namely Banning of Cryptocurrency & Regulation of Official Digital Currency Bill, 2019. The Court held that the stand of the legislature cannot be gauged from this bill as the bill, on the one hand, imposed criminal liabilities on the users of cryptocurrencies and criminalized certain activities like mining, holding, selling, trade, issuance, disposal or use of cryptocurrency in the country. On the other hand, the bill paved the way for the government to introduce its own digital currency, namely ‘Digital Rupee,’ by the Central. Bank. The Court also emphasized that The Crypto-token Regulation Bill, 2018 initially recommended by the Inter-Ministerial Committee contained proposals (i) to prohibit persons dealing with activities related to crypto tokens from falsely posing these products as not being securities or investment schemes or offering investment schemes due to gaps in the existing regulatory framework and (ii) to regulate VC exchanges and brokers where sale and purchase may be permitted. The key aspects of the Crypto-token Regulation Bill, 2018, found in paragraph 13 of the ‘Note-precursor to report’ shows that the Inter-Ministerial Committee was fine with the idea of allowing the sale and purchase of a digital crypto asset at recognized exchanges. Therefore, the intention and the stand of the legislature remains unclear on the matter of cryptocurrencies.
The Court first determined the reason because of which the notification by the RBI had been issued. The reason given by the RBI is the cryptocurrencies might disrupt the existing financial institutions. As reported during the January hearings, IAMAI’s legal counsel had argued before the court that RBI had itself failed to adequately research the matter before deciding to take action. “Opinion cannot be formed on imaginary grounds,” the counsel had argued.
The Court agreed that the RBI had failed to prove or bolster (through reasonable grounds) how the functioning of existing institutions could be disrupted through cryptocurrencies. The Court relied on its decision in State of Maharashtra v. Indian Hotel and Restaurants Association; there must have been at least some empirical data about the degree of harm suffered by the regulated entities (after establishing that they were harmed). It is not the case of RBI that any of the entities regulated by it has suffered on account of the provision of banking services to the online platforms running VC exchanges. The Court further iterated that the administrative orders, like the order in question, should be well reasoned and have a rational and cannot be ambiguous.
Without the backing of any sort of reasoning, such orders or notification need to be quashed. The Court then applied the doctrine of proportionality before finally deciding the issue in favour of cryptocurrency. The doctrine of proportionality includes the following:
• Whether the objective of the measure is sufficiently important to justify the limitation of a protected right,
• Whether the measure is rationally connected to the objective,
• Whether a less intrusive measure could have been used without unacceptably compromising their achievement of the objective, and
• Whether, balancing the severity of the measure’s effects on the rights of the persons to whom it applies against the importance of the objective, to the extent that the measure will contribute to its achievement, the former outweighs the latter.
The court held that RBI needed to pass the above test and to show at least some semblance of any damage suffered by its regulated entities. But the RBI could not show any. The Court finally held that the consistent stand of RBI is that they have not banned VCs and when the Government of India is unable to take a call despite several committees coming up with several proposals including two draft bills, both of which advocated exactly opposite positions, the Court cannot hold that the impugned measure is proportionate.
The impugned order by the RBI was hence quashed and, the order seems well reasoned. It would be a welcome move for cryptocurrencies, blockchain technology and exchanges across the country, though the future of the cryptocurrencies still seems to be shrouded in the mist because of legislative .