Mining of Cryptocurrency Legal in India: Law Check
Similar to normal/tangible currency, cryptocurrency is a virtual/digital currency that uses cryptography to conduct transactions. A very popular example of the same would be Bitcoin, which was invented in 2009. The Reserve Bank of India (RBI) issued a “Statement on Developmental and Regulatory Policies” on April 5, 2018 which directed the entities regulated by the Reserve Bank of India (RBI) to:
a) Not deal with or provide services to individuals or businesses/corporates dealing with Virtual Currencies (VCs) and,
b) Exit the relationship, if they have one with businesses/corporates and/or individuals dealing in Virtual Currencies (VCs).
Therefore, the restriction was placed on the entities regulated by the Reserve Bank of India (RBI) such as banks and other financial institutions and not corporates, businesses, MSMEs and SMEs that operate privately. Further, another circular dated 06.04.2018 issued by the of the Reserve Bank of India prohibited entities regulated by the Reserve Bank of India (RBI) to deal in Virtual Currencies (VCs) or provide services for facilitating any person or entity in dealing with or settling Virtual Currencies (VCs).
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 Hon’ble 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.
What is meant by Mining of Cryptocurrency?
Section 2(1)(k) of the Banning of Cryptocurrency and Regulation of Official Digital Currency Bill, 2019, defines the term “mining” as “an activity aimed at creating a Cryptocurrency and/or validating a transaction of Cryptocurrency between buyer and seller of Cryptocurrency.” In India, mining of cryptocurrency is neither legal nor illegal due to a lack of legislation in India governing the same. There is no law which punishes or prosecutes people/businesses/corporates from mining bitcoins and/or cryptocurrency in India. The Reserve Bank of India (RBI) had only imposed a prohibition on trading on cryptocurrency by entities regulated by the Reserve Bank of India (RBI) itself, such as banks and other financial bodies. Thus it is implied that mining of cryptocurrency can be done and now more so, because the Supreme Court has lifted the Reserve Bank of India (RBI) on trading of Cryptocurrency, it is assumed that mining of cryptocurrency will flourish in times to come. However, any one who traded in cryptocurrency prior to the judgement did so at his/her own risk because “cryptocurrency” was not recognised, or per se regulated by the Reserve Bank of India (RBI). Now, that “regulation” of cryptocurrency has been given a green signal by the Hon’ble Supreme Court of India, the onus is on the Government of India to come up with a regulatory and legal framework that governs the usage of Cryptocurrency.
Authored By: Adv. Anant Sharma & Mayank Barman