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Why the largest democracies in the world try to regulate Crypto? Reasonable reasons and causes

A Fundamental research about the complicity of use of crypto currency and kind of crypto currencies around the world, when there are 5 developed countries recognized the use of bit coins while other few countries has restricted the crypto currencies; why the value of bit coin currencies increased rapidly among all crypto currencies, whether this crypto currencies being a alternative in international trade for USD/Euro/Pounds etc., why might be the reasons that Government of India take initiative to ban/regulate the Crypto currencies; the possible impact inside / outside of India due to new regulations initiatives by government of India; how this regulatory initiative by government of India has seen in the eyes of with the socio-economical aspects along with latest legal phenomena.

Introduction to Crypto Currency:
Crypto Currency is known as Crypto, has seen one of the most efficient and unpredictable alternative digital currency found in modern era, being used without any restrictions in various countries among the world, including Japan, United States, South Korea, Australia and Germany; however some of the countries including Algeria, Bolivia, Bangladesh, Macedonia, Saudi Arabia, Qatar, Vietnam, Pakistan, Afghanistan has banned the crypto currencies. This brings lot more questions to common people, why some countries have not restricted and why some countries have restricted? What would be the stand of the world largest democracy on crypto currency? Before starting the brief, a few case history of crypto currency probably give us an idea to derive a definition of crypto currency on our own, rather than looking the definition of other inventors, economist and jurists.

Satoshi Nakamoto, a computer programmer has started to sell a unique virtual currencies in his block chain know as Bit Coin to public by a group in 2009 and the group his supporters began exchanging and mining the currency via block chain concept. The new idea of this commodity trading came into existence in Japan, then these being recognized across the globe, where the Bit Coin, recognized as first virtual currency or crypto currency, then slowly conquered the western world and now tend to conquer the rest of the world in this modern era.

The Cause and factors decide the Value:
Literature Reviews
  1. Iconic difference between Crypto vs Physical Currency When Physical Fiat Currencies has backed by the several countries through their government, has been governed / guaranteed by the relevant government and these currencies always fluctuates during the world economic recession; Satoshi Nakamoto's new ideology of virtual currency �Bit Coin� has been seen as alternative currency though such currency has not backed by any such government but guaranteed by block chain concepts, where all the users of the chain similar to the ways such internet, email operated from cyber space and developed their trust across the continent, where you can buy and sell the bit coin without any restriction, no governments can seen these as immoral, no government has objected it as illegal, until the specific block chain developed the currency as alternative currency to modern electronic world, where the Bit Coin currency has growth beyond the imagination of any commodity trading.
  2. Rapid Growth of Bit Coin, the first Crypto-Currency If we could bought Bit Coin for 1$ in 2011, we may able to sell it for $100 in today market, approximately the 1$ will grown 100 times from its value within 10 year, approximately 10 times growth within 1 year, where such growth nowhere recorded in any share markets, any investment of fiat currencies in the history, the Bit Coin recorded such growth with a short span, ultimately many of the users started to copy cat the idea, where now approximately 5392 over virtual currencies came into existence till date, named these currencies in general as �Crypto Currency� in the market.
  3. Who are the users of crypto currencies The developed countries such as United States has not take any steps against the crypto currency because their citizens has seen this would be commodity trading by knowing all risks involved; where almost 154 countries followed then, with a trust of the said block chain.
    Referred to africa-nigeria-cryptocurrency-adoption/
    only few of the countries like Afghanistan, Algeria, Fiji, Libya, Laos and Zimbabwe recorded has minimum usage of Bit Coin, but United States, Russia, China, South Africa has higher usage of Bit Coin, where almost 154 countries recorded with the usage of Crypto Currencies, around the world, despite of any difference neither they belongs to capitalist countries nor the democratic countries; nor they belongs to Communist countries; nor they belongs to Dictatorship countries.
  4. Virtual Currency seen as commodity across globe� Reasons: The citizens of different countries who early waiting for an alternative currency to US$, Euro, UK Sterling, started to do the commodity trade, has found the Bit Coin felt the virtual currency like Bit Coin, has given reorganization at most faith in the well established block chain, there they can easily sell and buy these Bit Coin, 24*7, 365 days without any restriction are far better option than existing Fiat currency and these transactions would be completed in few seconds, through their existing bank connected cards, electronic wire transfers and; there were banks convert those instantly where the user can take cash in ATM, where their Bit Coin has been converted to their country currency instantly, with the subjective currency conversion on that particular minute.

These attractive virtual currency usage in world market has became most common from east to west, the market volume of such major crypto currencies has been calculate as capitalisation- 160046487.html#:~:text=How%20many%20cryptocurrencies %20are%20there,of%20April%2022%2C%202020) e. Top 10 Crypto currencies rank and volume in US$

Top 10 Crypto
Currencies now
Volume in Billion % Percentage use in World Market
  1. Bitcoin (BTC) $128 71.82%
  2. Ethereum (ETH) $19.4 10.88%
  3. XRP (XRP) $8.22 4.61%
  4. Tether (USDT) $6.4 3.59%
  5. Bitcoin Cash (BCH) $4.1 2.30%
  6. Bitcoin SV (BSV) $3.4 1.90%
  7. Litecoin (LTC) $2.6 1.45%
  8. EOS (EOS) $2.4 1.34%
  9. Binance Coin (BNB) $2.4 1.34%
  10. Tezos (XTZ) $1.5 0.84%
Total Volume US$ $ 178.2 (Billions)

$0 $50 $100 $150
Tezos (XTZ)
Binance Coin
Litecoin (LTC)
Bitcoin SV (BSV)
Bitcoin Cash
Tether (USDT)
Ethereum (ETH)

There were $178.2 billion of Bit Coins spotted in the yahoo financial site on 4.2.2021, where Bit Coin remain conquered Lion share of 71.82% approximately. By adding the other crypto currencies across the globe approximately, the total market capitalization of $ 201 billion dollars.

Referred to, it is stated:
The range of bitcoin price predictions for the next 10 years is very wide. The Crypto Research Report has predicted bitcoin will be worth $397,000 in 2030. A major Tesla investor has predicted that bitcoin could be worth more than $1 trillion in under 10 years�.

Analysis of Crypto Currency in eyes of various experts
  1. Financial experts promote- Crypto? Though the success of crypto currencies across the world, being appreciated by many of countries, some of the countries found the crypto currencies usage has adverse effect in the socioeconomic development and started to ban the crypto currencies. There were many financial experts, such a chartered accountant, cost accountants claims in the Internet/ social media, promoting the crypto currencies by quoting that using crypto is not illegal in India and most of the countries promoting crypto currencies. The financial experts can view the crypto as currency for commodity rather than the virtual currencies. Their point of you is only where there are chances for Individuals to gain a profit while buying the crypto currency, though there are some significant risk factors, which is common, in any and all trade. The investment of buying a Bit Coin crypto has being recommended by thousands and thousands of financial experts around the world.
  2. The judicial experts point about the crypto, why? When many of the financial experts promoting the Crypto, the legal experts turn and see what would be other side of the Crypto? It is not illegal to use the crypto that does not mean it the legal, said by Professor Dr. Rajan Varghese Ph.D, Dean of Presidency during the online conference with Delhi Law Institute, during the inter-college studies; which has brought question of law, whether using the crypto currency is moral, what will be security when the currency has not backed by any specific government, In case of dispute, whom to sue, where to sue, under which law, in which court, under what jurisdiction etc. The judicial experts across the country have clearly visualized the risks of crypto and most of them insist to regulate the virtual crypto currencies.
  3. Legislators � Point of View The impact of Bit Coin and other crypto currencies various from one country to other, where the American found more usage of Crypto than other countries around the world and virtue the advantage of the trade capitalization fall bias to the capitalist country and where there is no necessity for United States to create, regulate the crypto. But, the impact of bit coin on the developing countries like Zimbabwe would have found adverse results where the government banned the Crypto currencies usage. �Today is derived from yesterday under the influence� and �where Tomorrow would be derived from today's Bill�. Where some of the countries would found the risks of the currencies and, came with new bills to regulate/ban and introduce their own currencies, where India's new bill named, The Crypto currency and Regulation of official currency bill 2021, probably the most expected bill in India probably not only regulate the usage of the currency but allow the government & private agencies to allow new crypto currencies backed block chains with minimum guarantee for commodity trade inside the country.

Media typically catch hold viewer -Crypto Ban Bill. Would it be real? In early 2018, It is true that the Government of India initiated a Crypto Ban Bill base on the reports of the government agencies but the government has changed their stand by redefining the bill by accepting the crypto trade but regulating it due to one case law, decided by supreme court.

Therefore, now Government of India has not banning the Crypto currencies but regulating it as suggested & directed by the Apex court. The government of India initiated �The Crypto currency and Regulation of official currency bill 2021�. The name itself speaks about the characteristic of the bill, the introduced bill has not intension in controlling any commodity exchange through crypto by its exchange; but Government of India has take initiatives to regulate the crypto currencies; make sure that citizens not being preyed by anti-social block chains when they exchange crypto, and just make sure that the crypto trading in India under the perusal of government monitoring agencies, not allowing any threat to the integrity of the nation.

Supreme Court precedent that make Indian Legislatures to redefine Crypto currency bill, the case law:
  1. RBI Circular 2018
    The Reserve Bank of India has sent circular dated April 6, 2018, vide RBI/2017-18/154, DBR.No.BP.BC.104 /08.13.102/2017-18, has directed all entities under the Reserve Bank of India guideline to Prohibit the virtual currencies (VC) transaction, as mentioned in the Para-2, of the circular: In view of the associated risks, it has been decided that, with immediate effect, entities regulated by the Reserve Bank shall not deal in VCs or provide services for facilitating any person or entity in dealing with or settling VCs.

    Such services include maintaining accounts, registering, trading, settling, clearing, giving loans against virtual tokens, accepting them as collateral, opening accounts of exchanges dealing with them and transfer / receipt of money in accounts relating to purchase/ sale of VCs The aforesaid circular has restrained the banks in India to deal any transaction with respect to virtual currency and take initiative to complete ban in the country.

    The Reserve Bank of India has also instructed the banks already involved in the Virtual currency transaction to exit from such transaction within 3 months. The Reserve Bank of India, has quoted in the circular their conferred power in the Para 4, as below:

    These instructions are issued in exercise of powers conferred by section 35A read with section 36(1)(a) of Banking Regulation Act, 1949, section 35A read with section 36(1)(a) and section 56 of the Banking Regulation Act, 1949, section 45JA and 45L of 2 the Reserve Bank of India Act, 1934 and Section 10(2) read with Section 18 of Payment and Settlement Systems Act, 2007
  2. RBI Circular has been challenged in Supreme Court by a writ The aforesaid circular has been challenged by Internet and Mobile Association of India, under Writ Petition (Civil) 528 of 2018 before the Hon'ble Supreme Court; The Hon'ble Justice Nariman, Hon'ble Justice Anuruddra, Justice Ramasubramanian has given remarkable judgment on March 4, 2020.
The three judge bench has reviewed several cases laws in India, has reviewed the various dimension of the cases studies across the globe, considering the various government agencies & the aforesaid countries acts along with policies, has compared various aspects on the usage of crypto, related case laws in Foreign, as well as India, the right of citizen under article 19(1) (g) and RBI functions, world policies in dealing/ handling crypto, all listed in the 180 pages judgment:
  1. Inter-Disciplinary Committee Report (Page 15)
  2. The Central Board of Direct Taxes (CBDT) about the usage of Crypto (Page 18)
  3. G-20 Finance Ministers and Central Bank Governors (Page 18)
  4. Banning of Cryptocurrency and 24 Regulation of Official Digital Currency Bill, 2019� (Page 24)
  5. The Petitioner argument, RBI has no power to prohibit the trading in virtual currencies (Page 33)
  6. The Respondent Reserve Bank arguments (Page 39)
  7. Functions of RBI as Central Bank (Page 44)
  8. Definition of VC in the view of Regulators across the globe including IMF, ECB (European Central Bank), USA, UK Government agencies
  9. Definition of VC in the view of non statutory in various countries (18 over countries), and with refer to the specified acts (page 75)
  10. Case decided by foreign courts on crypto currencies (Page 94)
  11. Case laws decided in Indian Courts (Page 108)
  12. Light Touch approach of other countries (Page 134)
  13. Right to Trade under Article 19(1) (g) of Indian Constitution (Page 143)
  14. Discidium Internet Labs Pvt, Ltd. Suggested safe guard measure
  15. Supreme Court set aside the RBI Circular on the grounds of proportionality (Page 178)

c. Judgment of Hon'ble Supreme Court The aforesaid judgment has referred in the link: 8_4_1501_21151_Judgement_04-Mar-2020.pdf The judgment Proportionality as Constitutional Right under Article 19(1)(g) �to practise any profession, or to carry on any occupation, trade or business�,

7.1. Therefore, in the light of the above discussion, the petitioners are entitled to succeed and the impugned Circular dated 06-04-2018 is liable to be set aside on the ground of proportionality. Accordingly, the writ petitions are allowed and the Circular dated 06- 04-2018 is set aside. The Statement dated 05-04-2018, though challenged in one writ petition, is not in the nature of a statutory direction and hence the question of setting aside the same does not arise.

Once again, Supreme Court of India has conferred the right of citizen to trade & Citizens fundamental right could not be taken by any government. The judgment can be library for Indian Legislatures to what to consider on crypto currencies where the said currencies already established, mined, recorded a unique trade exchange, and unavoidable virtual currency to various countries, hence Indian legislatures has modified the bills now to regulate it by considering the following aspects inside & outside the scope of the judgment and try to bring the bill to reasonable restriction in �The Crypto currency and Regulation of official currency bill 2021�.

6. What legislators point to consider in the new crypto bill? Though several reasons may revealed by the legislatures for regulating the currencies for its vast socio-economic and defense aspects; some reasonable predictions stated below possibly the primary reasons for the government of India by analyzing the complete case study of crypto currencies and it's impact around the world by its economist, judicial advisors, financial departments to take a decision to pass a bill to regulate the Crypto in India, cause the crypto currency fall nearly predicted, approximately reasonable decrease in Bit Coin; also the cause reasonable fluctuation in the value of all crypto currencies around the world. Government of India, has give the ban plan, now trying to regulate the crypto in the interest of citizen and welfare of the country; as a preventive measures; what are those consideration factors?

Those listed as:
  1. Cyber Terrorism
    The aforesaid attractive growth in the virtual currency market, has also created an ant fire competition, where many of unknown block chains, backed by several unauthorized groups for trading their crypto currencies, where they might used these for anti social activities such as cyber terrorism, drug deals, weapon trade and human trafficking; where these commodity trade might not be instantly spotted by any government agencies.
  2. Cyber Crimes
    The new unregulated block chain crypto currencies gone viral, and some of financial experts wrongly directing the people to purchase some of self generated block chain crypto currencies which would an alternative of Bit Coins, by misleading the investors and obtained their consent of market risks, where these citizen literally in screwed; since the commodity trade is a investment after knowing the market risk, there were no specific laws yet; other than Information Technology (Amendment Act) 2018, which does not cover the area of virtual currency in detail.
  3. Ensuring No Revenue Losses to government due to crypto use The revenue of the country mainly came from the taxes and the upcoming crypto exchanges in commodity trade would not fall under perusal of government agencies directly and these kind of situation may be taken as guaranteed by the block chain users to do any trade without paying any taxes to the government.
  4. Ensure Crypto not used against the Government Economic policies The crypto currencies backed up by block chains, most of those currencies has being backed up genuine block chain where those currencies completely a challenge to the government's physical currencies, where some rebel communities may upheld this kind of currencies to trade among them and ignoring the fiat currency of the said country and government may not obtain any taxes over the trade, may not enforce the levis, etc. Typically Crypto war can be threat to country's economy and also threat to integrity of the nation.
  5. Need for Govt. initiate law to protect it's citizens from Crypto crimes

The Government of India's Indian Penal Code 1860 (Amendment Act 2013), has seen the bible of criminal law, along with the Indian Contract Act 1872 (Amendment Act 2017) and where, Information and Technology Act 2000 (Amendment Act 2018) would be seen as supplementary for controlling the cyber offences but not absolute enough to resist the cyber crimes on trading; where the country required some law for protecting the citizens by setting a regulations to ensure these virtual currency and commodity exchanges would not be the place to suffocate the citizen, also protect the nation from economic offences.

Beyond all the other scope, the Government of India has to follow the direction by Supreme Court judgment in the above decided case. Hence, the Government of India, new bill expected to be the most important bill of this decade and may be followed by some other countries, may impact various organizations and block chains, and also cause reasonable change in the investment of crypto. Such important bill has not only decides the fortune of any crypto user, but also decide the economic destiny of country.

Written By: Ravikumar Vellingiri for LLM Research Studies in Presidency - University, Bangalore.
Email: [email protected]

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