The financial sector has transformed over the years ranging from barter system, cash, digital payments to cryptocurrency. Among many of the technological advancements, one thing that’s always doing the rounds in discussions in the world of fintech is the use of digital currency to make a transaction. In the light of the same, cryptocurrency has been buzzing across the industry and its players who have been raging headlines with regards to the same.
With a massive dependency on the virtual interface and the growing arena of digitization, legal framework concerning such a mode of transaction is a crucial aspect that needs to be analyzed thoroughly. Globally, countries have adopted cryptocurrency and have also formulated respective regulations for it and hence legalizing its trading and use. Back in 2018, the Indian government decided to ban the cryptocurrencies altogether because of the volatility of the market and reluctance of the government in consistent monitoring. However, despite of the lack of legislation in this regard, the Supreme Court in the case of Internet and Mobile Association of India v. Reserve of Bank of India (2019) removed the ban on dealing of cryptocurrency and asked the government to come up with cryptocurrency policies for the country. This move of the judiciary paved the way for cryptocurrencies in India. Further, RBI’s clarification stating that cryptocurrencies are not illegal have turned many eyeballs and encouraged many investors to resume crypto trading in high spirits. The said move may bring relief to millions of cryptocurrency traders in India who had to deal with a new payment method every few days in the last couple of weeks.
Nevertheless, this is still not a green light for an uninterrupted-smooth crypto trading experience.
Owing to the decentralized payment mechanism which based on the use of a distributed ledger, the said innovation that could have a wide range of impacts on various aspects of financial markets and the wider economy in the coming days. It has time and again said that the future of transactions will be a digital currency. However, several factors need to be considered that not only deter such progress but might as well destabilize the economic stability of our country.
Similarly, there are several reasons why institutions within India and the government have time and again expressed their reluctance to the legalizing of digital currency. One of the most common ones is the widespread belief that cryptocurrencies provide criminal organizations with new ways of committing crimes such as fraud, money laundering, and a host of other financial crimes. Also, in the trading of cryptocurrency, every transaction is recorded on the blockchain. This implies that the information is accessible to view by anyone at any time, and that’s a significant help for those wanting a more transparent banking system or financial system. As of now, Cryptocurrencies are effectively and promptly accessible to all their users. It is simply a decentralized system of currency that can be accessed across the globe. Moreover, even though cryptocurrencies are protected, exchanges are not fully secure as there is a possibility that cryptocurrency exchange can be hacked, and customers’ holding are stolen. Another alarming concern pertains to cryptocurrency being used as a veil for evading tax. Therefore, undoubtedly, where on the one hand, it seems to be a huge opportunity for the investors, on the other, the caveat for its misuse stands. It is true that with the growth of the digital world, it is inevitable to prevent one from dealing in virtual currencies, therefore, the only plausible way is to regulate it.
Amidst its growing relevance, the law makers have proposed a Cryptocurrency and Regulation of Official Digital Currency Bill, 2021. The said bill is certainly a welcome move which aims to regulate cryptocurrencies in India. The bill rightly proposes to channelize the currency through RBI which not only regulates the said market, but also eases the burden as imposed upon the government.
However, it is crucial that the laws comprehensively deal with the matter also create a well-defined enforcing machinery that can check its compliance with laws. Further, the said law needs to be modified with regards to addressing the misuse of funds and tighten the security involved therein.