Legit Trading of Cryptocurrency in India
Until recently, “Cryptocurrency” was neither recognised nor regulated by the entities of the Reserve Bank of India (RBI), which meant that Banks and other financial institutions did not consider “cryptocurrency” as a medium of exchange. Although, private players of cryptocurrency did operate in India, yet there was no security or protection from the Reserve Bank of India (RBI) or its entities. The same was challenged before the Hon’ble Supreme Court of India and the Court dismissed the Reserve Bank of India circular and legalised the trading on Cryptocurrency in India, since it failed the test of proportionality under Article 19(6) of the Constitution of India [Internet and Mobile Association of India v. Reserve Bank of India, W.P. (Civil) No. 528 of 2018 & W.P. (Civil) No. 373 of 2018]. The Supreme Court of India has held that Cryptocurrency cannot be regarded as a “legal tender” either in India or any other jurisdiction (which the Court analysed) but it possesses the other unique characteristics of money being – a medium of exchange; a unit of account and/or a store of value.
Cryptocurrency is not issued by the Government or any Financial body, instead it operates through a network of computers and can be stored in “wallets.” Unlike traditional currency, cryptocurrency is present only as a digital record of ownership that is stored on a Blockchain. When a user has to transfer certain units of cryptocurrency, he/she does so by simply transferring the same to another individual’s wallet. The transaction may take several hours to get completed since it is not completed unless it has been verified and added through “mining.” Mining is a process to verify and check cryptocurrency transactions.
Although, at present, there is no law and/or regulation governing trade of cryptocurrency, yet the same cannot be termed as “illegal.” Many private players such as Coinbase, Zebpay, Unocoin, Kraken enable trade of cryptocurrency. Just like normal currency, the value of cryptocurrency fluctuates and one can buy cryptocurrency through real money (Indian Rupees, Euros, United States Dollar etc.) and exclusively trade on crypto-exchange based websites/applications. One must keep in mind that every Bitcoin wallet (the most popular form of Cryptocurrency is Bitcoin), has different exchange rates. While some may have an exchange rate of 1%, the other might have an exchange rate of 5%. Cryptocurrency, at present, can only be kept on crypto-wallets and not on digital wallets such as Paytm, PayPal, PhonePe etc.
Key points before trading in Cryptocurrency?
a) Validity: Ensure that “exchange” is available in your country/area.
b) Reputation: Ensure that the exchange you’re using is highly reputed and is devoid of hackers and unauthorised users.
c) Exchange Rates: Exchange rates vary greatly from one platform to another.
d) Safety: Ensure the exchanges take place after proper Photo-ID verification. Many websites will ask for a two-way verification process to make your account secure and additional KYC documents (for users in India). Doing so, is necessary.
Thus, the entire issue with respect to “cryptocurrency” remains in an area where there exists a dire need to enforce a proper “Regulatory & Monitoring Mechanism” whereby the entire system of mining and trading comes under the direct preview and monitoring of the Government.
Authored By: Adv. Anant Sharma & Mayank Barman