CRYPTOCURRENCY RISE CONCERN: INDIAN LAWS IN THE NEW DIGITAL CURRENCY ERA
Author: Aditya Yadav, I year of B.B.A.,LL.B.(Hons.) from the Northcap University
Bitcoin is mostly about anonymous transaction, and I don’t think over time that’s a good way to go. I’m a huge believe in digital currency…but doing it on an anonymous basis I think that leads to some abuses, so I’m not involved in bitcoin.
- Bill Gates
Cryptocurrency is gaining popularity in the past few years and rapidly increasing day by day in India and the rest of the world. Cryptocurrency is digital money created from code and works on blockchain technology which is an encrypted string of data or a hash, encoded to signify one unit of currency.
In Indian cryptocurrency is seen as an investment way rather than used as a currency for purchasing commodities. In Indian only there are above 10 cr. Crypto owners in the world followed by the United States of America and Russia.
The main reasons for the rise of crypto in India in the last few years are various failed government policies and fewer returns and low-rate development resulting in disillusionment with the banking system and progressive taxation and further leading investments in cryptocurrency.
In 2017, a committee comprising FinMin, RBI and SEBI members is formed to look at the regulation over the assent. Two PIL’S were filed against the use of cryptocurrency in the Supreme Court of India.
On April 6, 2018, the RBI issues a circular banning all financial entities from dealing with any entity dealing in cryptocurrencies. After that, the Internet and mobile association of India and other petitioners had challenged the circular by arguing that it had put an end to the industry by taking it out of the formal economy, even though there is no ban on cryptocurrencies in the country.
In March 2020, the Supreme court bench quashed the central bank’s circulation on grounds of disproportionality. The judgment noted that the RBI has failed to show at least some semblance of any damage suffered by its regulated entities, to back its decision to effectively bar cryptocurrencies in India.
In 2021, the government says it will introduce a bill to create a sovereign digital currency and simultaneously ban all private cryptocurrencies. It was listed as Cryptocurrency and Regulation of official Digital Currency Bill,2021 for introduction budget session but it was not brought in the parliament.
In the present-day scenario through various sources, it is said that the government of India is in a thinking mode whether to ban cryptocurrency or not.
Dangerous impacts of cryptocurrency
As cryptocurrencies have the potential to change the world for the better but at the same time they can be used to facilitate criminal enterprises such as money laundering schemes, direct trafficking and even terrorism. Terrorist groups have been interested in crypto because it enables almost instant transfers of money across borders without the oversight of central authority since terrorists are locked out of the traditional financial system they have been testing Bitcoin as an alternative way to fund their activities and are a sustainable source of funding for terrorists and it gives a real advantage to the terrorists as they can receive an unlimited amount of money from everywhere in the world by accepting Bitcoin however once they receive their Bitcoin they are likely to have a hard time managing and spending those fund. So, terrorists need to cash out this means they need to rely on some sort of centralising infrastructure such as a cryptocurrency exchange. Terrorist groups like ISIS are raising their funds for more than two years and raised more than hundreds of thousands of dollars worth of bitcoins also because the Bitcoin price went up this time they call their supporters to donate the organization with Bitcoin from different means like websites. One of the many jihadi groups fighting in the serial civil war was also asking for Bitcoin donations on Twitter and they did not publish the article address but the doors were up to send a direct message to more information on how to donate. Cryptocurrencies are far from being a prominent source of funding for terrorism but still, blockchain technology is evolving and terrorists are learning fast which means regulators and companies shouldn't ignore this potential threat coming shortly.
As per the article by The Guardian, it states that “IMF warns of global risks from unregulated cryptocurrency boom” and greater financial instability, fraud, and funding of terrorism likely unless government toughen supervision, the fund says.As cryptocurrency is deregulated, a peer-to-peer economy and decentralized and can increase the risk of cyber frauds and thief. It is not fully secure and a gateway for spoofing, hacking, fake initial coin offering (ICO) etc.
Cryptocurrencies are very volatile and unstable.
The government will introduce the new Crypto Bill in Parliament after Cabinet approval, Union Finance Minister Nirmala Sitharaman said on November 30. The finance minister also said that regulation of NFTs (non-fungible tokens) is also being discussed by the Centre. Speaking during Question Hour in Rajya Sabha, the Finance Minister said, "We are close to bringing a bill in parliament. It will be introduced in the house once the cabinet clears the bill." Sitharaman said the new Bill has come up after reworking on the old Bill that could not be tabled in previous sessions of Parliament. She said that the risk that cryptocurrencies can lead to undesirable activities is also being closely monitored. No decision was taken on banning the advertisements published on different cryptocurrency platforms. However, steps will be taken to create awareness.
If the government would not ban cryptocurrency, then a proper regulation and centralisation of the transaction should be there. Misleading ads regarding a cryptocurrency should be monitored by the Advertisement Standard Council of India (ASCI) and awareness should be circulated by the government regarding the risks involved and volatility in cryptocurrency.
Consumer protection act should be made into consideration like SEBI which is a very successful body that monitors investments in the stock market and the person is protected. Money laundering and issues like terror financing should be strictly monitored and stopped by making suitable schemes and actions made by the government.