Is Cryptocurrency to be Banned in India? What We Know So Far
01 Mar 2022Everyone anticipating a cryptocurrency ban in India isn't feeling easy, as the government is expected to present a Bill in Parliament that, if enacted, will prohibit 'private' digital currencies.
The Bill attempts to outlaw all private cryptocurrencies in India, but it provides for specific exclusions in order to encourage the technology platform of cryptocurrency and its applications. If approved, the Bill will provide principles for the regulation of cryptocurrencies in India. The Bill aims to outlaw cryptocurrency while also laying the groundwork for the formation of an authorized cryptocurrency to be released by the Reserve Bank of India (RBI).
In the recent budget speech, Finance minister Nirmala Sitharaman announced that the government is going to impose 30% tax slabs or any digital asset transfer.
But there are mixed fears and speculations of what is going to be the future of cryptocurrencies ban in India. So, that's why we have created this article to answer some of the burning questions that are going on in the minds of crypto investors and enthusiasts.
Cryptocurrencies are a type of electronic currency. They are also known as digital currencies or cryptos. They enable contactless payments and work similarly to traditional currencies. Unlike traditional currencies, which may be traded physically with bills and coins, cryptocurrencies can only be swapped digitally using lines of computer software. Bitcoin and other cryptocurrencies are well-known cryptocurrencies, but there are many more.
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Cryptocurrencies around the world leverage blockchain technology.
Blockchain, also known as Distributed Ledger Technology (DLT), uses decentralization and cryptographic hashing to make the record of any asset irrevocable and accessible.
A blockchain is a distributed ledger that holds encrypted pieces of data and then links them together to produce a unified view of the information. Rather than being duplicated or moved, digital assets are disseminated, resulting in an irreversible trace of an entity.
The asset is decentralized, enabling the public complete real-time access and transparency. A visible log of updates protects the document's authenticity, fostering confidence in the item. Blockchain is a must-have technology in practically every industry because of its intrinsic safety precautions and accessible ledger.
What is a crypto exchange?
A crypto exchange is like any other marketplace. Still, they don't have regulatory authority in India right now, and they primarily operate with their own set of rules. Most of the time, they vary from exchange to exchange, creating a problem for the user in case of any dispute.
You can purchase your digital currency from these crypto exchanges. To buy cryptourrency, you must go to an electronic crypto exchange. These marketplaces provide a wide range of cryptocurrency categories, with purchasing rates fluctuating all through the day.
Cryptocurrency ban news has been going on for a long time in India, but the Indian government has some strong reasons why they don't support existing cryptocurrencies.
A currency must stay constant throughout time in order to serve as a measure of value. That's not the case for cryptocurrencies, as seen by the enormous price volatility.
A unit of an account implies that currency should enable us to readily establish an idea of the worth of products and services and compare them to one another. Crypto Currency's instability makes it impossible to see it as a monetary unit.
Currency, as a medium of exchange, must make it easier for sellers and buyers to perform transactions. Nevertheless, constraints like transfer rates and fees, as well as bitcoin's unpredictable price, make it impossible for it to function successfully as a means of exchange.
The government does not guarantee existing cryptocurrencies. The government does not protect cryptocurrency accounts in the same way that bank deposits are. Suppose you deposit cryptocurrencies with a third-party business, and the business goes bankrupt or is compromised. In that case, the authorities are under no duty to intervene and assist you in recovering your funds.
Cryptocurrency transactions are not legally protected. If anything really goes horribly wrong with your atm card, you are legally protected. For instance, if you need to challenge a transaction, your card provider has a procedure in place to assist you in obtaining your full refund. Usually, cryptocurrencies don't really have a mechanism in place for that.
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In 2018, the Reserve Bank of India published circular prohibiting banks and other financial institutions from engaging in cryptocurrencies or offering services to any company or individual engaging in cryptocurrencies, highlighting dangers connected with cryptocurrencies. This effectively prohibited the usage and banned cryptocurrencies in India.
Two years later, the Supreme Court reversed the circular on the basis of fairness. While the court accepted that the Reserve Bank has the authority to control cryptocurrencies, including crypto assets, it stated that the restriction must be reasonable to the risk of danger caused.
Finance Minister Nirmala Sitharaman announced in her Budget 2022 address that the exchange of virtual digital assets would be subject to a 30% tax. She also announced that the Reserve Bank of India is going to launch a 'digital rupee' in the next fiscal year.
Other provisions in the recently proposed Section 115 BBH include a prohibition on adjusting losses against all other sources of revenue. There are no deductions or exemptions permitted; nevertheless, further clarification on deductions for the cost of purchasing crypto assets and setting-off losses from trading in those other crypto assets in a particular fiscal year is on the way. Furthermore, any transfers of such assets will be subject to a 1% tax deducted at the source. Even gifting is subject to the 30% tax.
Finance Secretary Somanathan has compared cryptocurrency to betting. The Reserve Bank of India remains adamantly opposed to cryptocurrency. It advocates an absolute prohibition, with Governor Shaktikanta Das saying again that it is a danger to economic stability and has no intrinsic worth, not even that of a tulip! According to Deputy Governor Rabi Shankar, Cryptocurrency is much worse than a Ponzi scam. According to authorities, the fact that the item is taxed does not imply it is legitimate.
Following this standoff, the current situation in India is that there is no legislation or regulation that forbids dealing or investing in cryptocurrencies. Still, the problem that traders are concerned about is the unpredictability of such a stance in the coming. This is especially true in view of the coming prohibition since a new bill, the Cryptocurrency and Regulation of Official Digital Currency Bill, 2022, has been proposed in the Indian parliament. The Bill's parameters are not yet available. Still, it is expected that it would carry through what was suggested in the draft bill of 2019, which advocated a crackdown on digital currencies in India.
There is a little question whether cryptocurrencies and blockchain have the ability to propel India's trained and experienced youngsters into the next generation of employment opportunities. Upcoming breakthroughs in the cryptocurrency and blockchain area have the capacity to be labeled as a game-changer as well as being a viable source of employment and economic development. Still, the legal and safety problems must be solved first before leveraging this technology.
We hope this article helps you in clearing the cloud around the legality of cryptocurrency in India.
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