For understanding whether trading of Crypto Currencies in India is legal or not, we will have to first understand the definition of Trading! Trading in its conventional sense means the activity of buying and selling goods and / or services. However, we are mooted with a fundamental issue of how is crypto currency classified as ….?
Is Crypto Currency classified as a Currency or is Crypto Currency classified as an Asset or is Crypto Currency classified as a Commodity?
The Reserve Bank of India had on April 6, 2018, vide Notification No. RBI/2017-18/154, DBR.No.BP.BC.104/08.13.102/2017-18 prohibited dealing in virtual currencies. Subsequently, the Supreme Court of India vide its Judgement in Writ Petition (Civil) No. 528 of 2018 had quashed the RBI notification.
The Government was then contemplating to pass and implement the Banning of Cryptocurrency and Regulation of Official Digital Currency Bill, 2019 which later got substituted with The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021.
The introduction of this bill in the Parliament has been delayed. Simultaneously, the Reserve Bank of India is in the process of coming out with their own Central Bank Digital Currency (“CBDC”).
While all this will take some time, the investors are confused whether to trade or not in Crypto Currencies!
The cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. Many cryptocurrencies are decentralized networks based on blockchain technology, a distributed ledger enforced by a disparate network of computers.
A defining feature of cryptocurrencies is that they are generally not issued by any central authority, rendering them theoretically immune to government interference or manipulation. Considering the inherent nature of the Crypto Currencies, getting them regulated by any country’s Central Government is a gargantuan task.
Presently, there’s no law in the country that bans cryptos or says that trading such digital assets is illegal. Currently, the Government is working on a bill that will regulate crypto trading, and it will bring rules on how cryptocurrency exchanges are supposed to operate in the country and how income from such currencies will be taxed and other aspects. Even the RBI hasn’t said cryptos are illegal, though the bank has concerns.
In the absence of any laws, if individuals are trading in crypto currencies, they should be mindful of the taxation implications, GST implications and FEMA guidelines that would impact the trading activity when the Bill is passed and implemented.
“When the RBI, after due internal deliberation, says that there are serious concerns on macro-economic and financial stability, there are deeper issues, which need much deeper discussions and much more well informed discussions,” said RBI Governor Shashi Kanta Das at an event recently. So, till such time the laws are indecisive, investing in Crypto currencies for long term investments or trading activity is to be decided by each individual bearing in mind the implications that might follow on its regularisation!
This article is written by the
Crypto Legal team of RKS ASSOCIATE
The content of this document do not necessarily reflect the views / position of RKS Associate, but remains a probable view. For any further queries or follow up please contact RKS Associate at admin@rksassociate.com