Regulation of Cryptocurrencies in India Current Affairs

Cryptocurrency exchanges are considered legal in Singapore, but have to be registered with the Monetary authority of Singapore (MAS). However, recently in Jan 2022, owing to the volatility of cryptocurrency values, The Monetary Authority of Singapore (MAS) issued further guidelines to Digital Token Providers (DTPs). They are prohibited from actively advertising their service offerings to the general public.

However, within just 18 days of the announcement, Bitcoin prices on exchanges jumped to $1,020. In contrast, in the United States, where Bitcoin prices typically set the benchmark, they remained at $770 per Bitcoin. This difference in prices highlighted a clear premium on Indian Bitcoin exchanges during that time. Following this, the State Bank of India (SBI) took a proactive role in facilitating collaboration between banks and technology firms.

These developments point to the probable status of cryptocurrencies as that of digital assets and any gains from trading in them to be treated as capital gains. The DFPI regularly provides no-action letters regarding digital currency businesses on its website . Digital currency what is crypto payment ATMs are often exempted, and a May 27, 2021 opinion letter exempted a peer-to-peer digital currency transaction platform from money transmission licensing. Additionally, the European
Securities and Markets Authority (ESMA) has been involved in
cryptocurrency regulation.

In 2021, Switzerland introduced the Distributed Ledger Technology (DLT) Act with the goal of adjusting Swiss laws to take advantage of cryptocurrency innovation. The DLT Act included a new type of license category for cryptocurrency trading venues. The cryptocurrency regulations in India are still in a state of deadlock, but it appears that the ice is melting, and Reserve Bank of India (RBI) has finally shown some leniency. Recently, the EU’s Fifth and Sixth Anti-Money Laundering Directives (5AMLD and 6AMLD) have come into effect, tightening KYC/CFT obligations and standard reporting requirements. In September 2020, the European Commission proposed the Markets in Crypto-Assets Regulation (MiCA)—a framework that increases consumer protections, establishes clear crypto industry conduct, and introduces new licensing requirements.

The influence of cryptocurrency in this world has been quick, in comparison to any other financial product gaining popularity and adoption by people in large. International organizations should study it because it influences world economic activity. The two organizations International Monetary Fund (IMF), World and Financial Action Task Force (FATF) have taken up a linear approach towards cryptocurrency and its regulation. During the B20 Summit in India on August 28, 2023, Prime Minister Narendra Modi highlighted the urgent requirement for a comprehensive global framework for cryptocurrencies. He emphasized the significance of adapting to the ever-changing digital landscape and stressed the importance of utilizing transformative technologies like artificial intelligence (AI) to navigate this evolving terrain effectively.

However, the country taxes companies that regularly transact in cryptocurrency, treating gains as income. A miner, who uses their computer to facilitate mining of Bitcoins also get a part of the CC (as a consideration) after successful verification, this can be deemed as business income as well. But if it is considered as a capital asset, it may not have any tax implications because a miner spends no cost of acquiring the Bitcoins because it is self generated during the mining process. Srinivasa Setty[25] it was noted that, in a case where the cost of acquisition were not ascertainable, the computation mechanism could not come into play.

Because India lacks a regulatory system to regulate its operations, it is presently uncontrolled. According to the Ministry of Corporate Affairs, companies must now document their crypto trading/investments inside the financial year. “The reason Japan requires this kind of segregation is because they learned the hard way from incidents like Mt. Gox and Coincheck,” La Rose says. “This makes things much simpler for any Web3 operation in Japan,” La Rose says. “I think there are still opportunities in the American market despite the current state of regulatory uncertainty.

• Japan established the Japanese Virtual Currency Exchange Association (JVCEA) in 2020, and all crypto exchanges are members.
• Further, let us examine the characteristics of the object, which can be generally defined as a commodity.
• SEC Chair Gary Gensler notably said in March that if crypto platforms and lenders aren’t regulated as stock exchanges, they can’t be used as qualified custodians by investment advisors.
• In countries like the US and Canada, trading in virtual currencies is legally permitted.

[41]  It is an independent agency made by the U.S government to regulate future and option market. The situation changes when CC is examined under the Sale of Goods Act, 1930 where money is an essential element for completion of a contract. Section 2(10) of the Act states that “price” means the money consideration for a sale of goods[18], and money refers to a legal tender, which CC is not. This implies that CC’s cannot be used as a consideration to buy goods under the Sale of Goods Act, 1930.

The order was challenged in the supreme court of India in the case of IMAI v/s Reserve bank of India. Cryptocurrency exchanges incurred losses due to suspended transactions and lack of banking access, leading to many closures and user losses. Exchanges challenged the ban in court, filing their first petition on May 1, 2018.

The government’s executive branch will decide which office will be responsible for monitoring the law after it is enacted. Tokens considered securities would remain under the Brazilian Securities and Exchange Commission (CVM) jurisdiction. The country has been working on several aspects when it comes to regulation, including taxation. In September 2022, the government announced it would introduce remittance rules as early as May 2023 to prevent criminals from using cryptocurrency exchanges to launder money. The Act on Prevention of Transfer of Criminal Proceeds will be revised to collect customer information. It has to be noted that in 2017, the Supreme Court of India expressed its intention to regularize CC, which is contrary to the action of RBI.

Therefore, within the EU, transactions and trading in cryptocurrencies are legal, subject to individual state rules. The European Court of Justice (ECJ), the apex court of the European Union, has ruled that the exchange of digital currencies can be considered as a supply of services. Then there are countries that may not have legalised the use of crypto as legal tender, but allow trading practices with minimal regulations. However, other than El Salvador, as of 25 November, no other nation has legalised any cryptocurrency, including bitcoin, for use as a legal tender. The first and most rare type of legality is the governments allowing cryptocurrencies to be used as legal tender by the people.

While crypto is not considered legal tender in Canada, the country has been more proactive than others about crypto regulation. Canada became the first country to approve a Bitcoin exchange-traded fund (ETF), with several trading on the Toronto Stock Exchange. China classifies cryptocurrencies as property for the purposes of determining inheritances. The People’s Bank of China (PBOC) bans crypto exchanges from operating in the country, stating that they facilitate public financing without approval.

Individuals engaged in cryptocurrency activities could face a 10-year prison sentence, while exchanges could be penalized with up to 5 years of imprisonment. It’s important to note that this bill has been deferred indefinitely up to the present time. Blockchain is a system of recording information in a way that makes it difficult or impossible to change, hack or cheat the system. Cryptocurrency mining can be time-consuming, expensive, and sporadically profitable. Mining has an appeal for many cryptocurrency enthusiasts as miners are paid directly with crypto tokens for their efforts.