What is Crypto Currency
Crypto currency is a virtual currency stored in Digital wallet. It is
independent of any centralized system or authority. It means there's no
centralized database to carry currency and hold transactions like it is just in
case of Banks neither is it governed by any government, but holders of
cryptocurrency themselves form a part of the database etching the transaction
- CryptoCurrency is also referred to as Virtual Currency, Digital
Currency. It derives its name Cryptocurrency from the fact that the each
currency packets is encrypted. They can be bought online by mining or by
using credit card through few companies which act like exchanges. There are
different types of cryptocurrencies with major players being Bitcoin,
- Crypto Currency is emerging as a universal currency. It is just like a
vast ocean into which other currencies like USD, INR, YEN, etc can get
merged and also depart from the vast ocean on withdrawing from it. Which is
equivalent to buying CryptoCurrency using other currenciesINR,USD etc) and
selling those Crypto currencies to get equivalent value in intended
currencies. CryptoCUrrency has become a standard currency using which
currency holders can transfer money from one country to another without ever
any intervention of any national or international Authority. Thus
eliminating middlemen in international monetary transactions. In the current
era Cryptocurrencies are virtual gold which is being mined and exploited
without any regulation.
- Though nations were resounding for a World currency common across all
the nations, no single currency was ever finalized to be a global currency.
US Dollar played the role of Reserve Currency in every Coomercial
transactions. With advent of CryptoCurrencies in the present era and based
on the trend it is setting, there is no doubt that it may soon become the
World currency unanimously without United Nations(UN) ever declaring it.
Pros and Cons of Crypto Currencies
Cryptocurrencies are currently an asset to hold on to. Tesla, the biggest
electric car manufacturer, has invested $1.5 Billion into Bitcoins.
Cryptocurrencies if allowed can be legal tender too in future.
While cryptocurrencies seem to be unstoppable, there are a number of ways in
which they can be abused. It is undisputed fact that criminals are the first
ones to adopt latest technologies.
Money Laundering, Drug Trafficking, Terrorist Financing, Weapon Proliferation,
Cyber Crime and Sanction evasion are some of the activities for which Virtual
currencies are susceptible to misuse.
Regulation in India
Recognition and acceptance of Cryptocurrency in India experiences a period of
inertia, similar to that of any emerging technology in India. As one of the
world's most populated nations, there are dangers in introducing such major
technological advancements. Another explanation for hesitancy is that the
country's population's economic situation is not uniform, with increasing
Past stand on Cryptocurrencies
- RBI, the Central Bank in India passed resolution that private virtual
currencies are not backed by central ban
- In 2017, two Public interest Litigations were filed with prayers
contradicting each other
- One was filed to ban transaction using cryptocurrencies. Other PIL was filed to
regulate the use of them.
- However, in 2018, RBS issues a circular to commercial institution and banks to
refrain from dealing in VCs or to provide services to those entities dealing
- However this circular was challenged and Supreme Court in 2020 held that the
ban was unconstitutional. This resulted in increase in VC transaction in India.
- The government in 2021 has revealed its plan to ban all private VCs and
introduce Sovereign Digital Currency. This is going to be the Central Bank
Digital Currency (CBDC
- With immense advancement in modes of payment the Indian Government must take
immediate steps to regulate CryptoCurrencies and
- When the Internet was first introduced, India was reluctant, and as a result, it
was unable to fully exploit the country's talent pool. As a result, a large
number of talented Indians have emigrated to other nations. Similarly, delaying
regulation and recognition of cryptocurrencies by India may result in a loss of
- It is high time the cryptocurrencies are regulated and recognized. In order to
extract the full potential of cryptocurrencies it must preferably done sooner
Regulation in Other Countries
Several countries have been quick in accepting Cryptocurrencies where as few
other countries are still unsure of its future
US Laws are categorized as Federal Laws and state Laws. Federal laws are set of
rules applicable throughout USA whereas each State has its own system of laws.
Though Cryptocurrencies are not legal tender in US, some companies like
Microsoft and Mastercard are accepting payment through Bitcoins which is a type
Are federal or State laws applicable to Cryptocurrency in US?
The Securities Act 1933 regulates offer and sale of securities.Under this Act,
offering of securities must be registered with US, Securitites and Exchange
Commission (SEC). Commodity Exchange Act, Investment Company Act 1940 and
Investment Advisers Act 1940 govern investment Advisers to such funds.
Federal Agencies like Financial Crimes Enforcement Network(FinCEN) requires
Money and Banks Services Businesses (MBSs) to submit reports, keep records and
verify identity of customers in transactions involving Virtual Currencies and
Digital Assets with Legal Tender Status(LTDA).
Stand of each state in USA regarding Virtual currencies differs. While
California, Alabama and many other states have liberally accepted VCs, on
the other hand laws in some states like Kentucky do not embrace Virtual
Currencies with open arms
- Russia: Just like in India, Russia has not recognized Cryptocurrencies as
legal tender nor as assets. Its use is still not regulated in Russia.
- Canada: Bitcoin has received friendly response while making sure that
cryptocurrencies is not used for money laundering. However, cryptocurrencies are
not legal tender in Canada too. However cryptocurrencies can be used to buy or
sell goods or services on the internet. One can but and sell digital currencies
in open exchanges.
- China: There is strict policy against cryptocurrencies by Banking systems in
China. Government has cracked down on miners in the past.
- . UK: Europe is regulating cryptocurrencies by including cryptocurrency
companies like exchanges within the scope of 5th Anti Money Laundering
Directive. Government in UK has taken favorable stance towards Bitcoins. Tax
regulations are applicable to Digital Currency.
Things to consider before regulating Cryptocurrencies
Governments must be careful neither to overregulate nor under regulate them as
both overregulating and underregulating poses dangers to the society and its
citizens. Hence regulation is a walk on the edge. Here are few factors to
consider before regulating cryptocurrencies.
Should digital currencies be taxed as an assets, commodities or capital gains ?
In the US it is treated like hybrid Asset. If it is security token, SEC will
come into play, if it is commodity token then commodity commission will come
into play. If it is stable coin then Federal Reserves will have a role to
However what should be looked into is that there should be no double taxation as
guarded under constitution.
- Anti-Money Laundering
Countries across the globe have come up with rules and regulaions to include the
firms dealing in these cryptocurrencies under their RADAR. Canada became the
first country to regulate Ccryptocurrencies in the field of Anti Money
Landering in 2014.In Singapore, crypto businesses operating in the country must
obtain Licenses to comply with AML regulations.
- Securities Laws
What constitutes a security is that a financial asset which can be traded. But
it is still not clear if cryptocurrencies fall into the category of assets
without casting any doubt. Government may utilize the existing definition of
security or may have to amend the existing laws to include cryptocurrencies into
the definition of security.
Due to lack of regulations, there is enormous growth of crypto currencies. There
are risks of over regulating. There is a misconception in the minds of
authorities that the transactions of cryptocurrencies cannot be traced. This is
a complete misconception as every transaction forms part of the currency packet.
Hence there is a need for educating authorities at every level to understand and
prevent misuse of cryptocurrencies. People in India are currently hesitant to
invest in cryptocurrencies as there is no regulation in place. However the
recent announcement of its government to introduce Central Bank Digital Currency
has given a ray of hope to those looking to invest into cryptocurrencies. The
sooner its usage is regulated the better for the country.