The Lok Sabha Bulletin, dated 29-1-2021, stated the intention of Parliament to launch the Official Digital Currency Bill, 2021 for consideration. While the 2021 Cryptocurrency Bill is not publicly available, the purpose of the 2021 Cryptocurrency Bill is, of course, to establish an enabling environment for the publication of the official digital currency by the RBI and to ban any private cryptocurrency available for use in India. There is currently no clarification with regard to the concept of “private cryptocurrencies.” Experts, however, feel it includes any cryptocurrency not institutionally recognised by the RBI.
The cryptocurrency which, despite the fact that the digital money and technology behind it, particularly the blockchain, have been there for more than a decade, is a relatively new concept for regular Indians, with the emergence of Bitcoin in 2008 as the world’s first major crypto-money.
Since then, a multitude of different cryptocurrencies have sprung to life, 10,295 separate cryptocurrencies are accurate depending on the market value, and the number will rise only. With the idea of digital money, India will surely create problems about ownership, legal protection, and the role of intellectual property law in “expansion towards the moon,” as it was termed.
The fintech sector has been on an upward trend, notably with the establishment of COVID-19, due to an exponential boom and exceptional technological advancements in India. As cryptocurrencies such as Bitcoin, Ripple, Dogecoin, and others become increasingly popular and exposed to Indians, people have begun investing much of their time and money in these virtual currencies in the hope of taking full advantage of the world’s current trend.
History of Cryptocurrency In India
Indian Reserve Bank has described cryptocurrency as the digital/virtual money that is generated by a series of written computer codes based on encryption and is hence independent of any single central issuing authority per se.
In 2017, the proliferation of cryptocurrencies in India was so apparent that the Indian Reserve Bank and the Ministry of Finance cautioned the general public that bitcoin is either real or lawful. It was, however, simply a warning, and RBI at the time announced no legal action or penalties.
In 2018 the RBI issued a circular that prevented all banks and financial institutions from dealing with digital currency or enabling transactions for and on the same, whether it commercial or financial in nature.
The motivation for this decision was, in accordance with them, to defend the interest of the public while maintaining the integrity of the market and avoiding money laundering. This action led to market turmoil, which dropped prices in India as people liquidated their holdings. In a petition from the Internet and the Association of India (IMAI), the circular violated the norms of fairness and equal opportunities. The Supreme Court ruled. Moreover, the IMIA noted that “the circular is obviously arbitrary and it imposes an unreasonable restriction based on irrational categorisation.”
In March 2020, the Indian Supreme Court decided, in its 2018 circular, that an RBI restriction on cryptocurrencies be lifted in its 2018 circular, with respect to the Internet and Association of India vs. Reserve Bank of India Writing Petition (Civil) No.528, of 2018. For Indian crypto-monetary traders, it was a positive move.
The RBI released a second circular recently on 31 May 2021 reiterating the point made in the judgement on IMAI, urging banks to cease to refer to the 2018 RBI circular. This circular restated the present legal situation of the “not regulated” cryptocurrencies in India.
In India, cryptocurrency is regulated under special legislation. However, numerous current Indian regulations may be in force because of the nature of these cryptocurrencies, such as the 2002 Money Laundering Act and the 1956 Securities Contracts Act.
In the fields of intellectual property and cryptocurrency, besides the legislation, there is also legal uncertainty which we will explore in this article.
Regulation and Legislation of Cryptocurrency in India
The fact is, crypto is not controlled and the purchase or trade of crypto is not illegal. It is a bit surprising for consumers but that is the ultimate fact. A regulation bill entitled ‘Official Digital Currency Bill 2021’ was submitted to the Parliament by the Indian government. This would not however be practicable as discussions were not concluded with a significant number of parties.
“The Union Cabinet is expected to adopt Cryptocurrency Bill 2021 to govern cryptocurrencies and its booming sector in India, according to Finance Minister Nirmala Sitharaman”
The New Cryptocurrency Bill 2021 recognises the Grey Zone of Cryptocurrency Regulations and seeks to ban all private cryptocurrencies. Nevertheless, a grey area still covers all types of cryptocurrencies. In a nutshell, the Official Digital Currency Bill 2021 of the Cryptocurrency and the Regulation aims to ban all digital devices and implement a controlled method to lawfully introduce a cryptocurrency.
AIM BEHIND THE CRYPTOCURRENCY BILL, 2021
The key aims of the 2021 Official Digital Currency Bill are as follows, in accordance with the Lok Sabha Parliamentary Affairs Bulletin:
- To create a framework for the development of the official digital currency of the Reserve Bank of India.
- Forbid all Indian private cryptocurrencies.
- Specific exclusions to support the underlying cryptocurrency technology and its uses.
When the Act will be implemented, several cryptocurrencies will take the official path defined by the Act to become lawful in India. In addition, when the Act 2021 on Cryptocurrency is made, it aims to introduce its own official Crypto-monetary under Digital Currency of the Central Bank (CBDC).
The 2021 Cryptocurrency Bill contains a grace period in which the public may sell any private crypto assets prior to the provisions of the bill penalising private crypto-building mining, issuing, and trading.
In addition, virtual currency/crypto-monetary legislation is aimed at facilitating trade and safeguarding the technical environment. However, the risk component of crypto-current investment and ownership or holdings will remain the same despite the establishment of the state-owned crypto-currency supervised by RBI.
The government of India has ordered firms to declare their holdings on cryptocurrencies starting with the freshly started fiscal period in the last week of March 2021 pursuant to the most recent changes to the Companies Act, 2013, under Schedule III. From now, firms must now report their gains and losses on the transaction of cryptocurrency/virtual currency, the amount retained and any deposits or advances to be made to sell or to invest in cryptocurrency/virtual money. Those in the crypto industry applauded this development, as it is assumed that all Indian enterprises may store crypto-monetary funds on their balance sheets.
Intellectual Property Regulation of Cryptocurrency
The establishment of the Bill 2021 is likely to be a well-known idea for cryptocurrencies in India and is it commonly asked if it is unpredictable by defining ownership that may be achieved by protecting intellectual property, including copyright, patent, and trademarks.
Many start-ups using crypto tech are likely to look for legal safeguards for their methodologies and operations in accordance with intellectual property legislation following the implementation of regulatory measures in India.
Bitcoin hasn’t been patented for the most known cryptocurrency. The lack of IP protection allows such coins to proliferate so quickly according to experts. However, it also acts as a dysfunction, and due to the IP, cryptocurrency rise and fall rate is unforeseeable and depends on a range of external circumstances.
There are, nevertheless, numerous concerns about IP protection for Bitcoin, saying that it doesn’t require IP protection because it has its own self-management procedures, thus people feel that cryptocurrency should remain open source. The most likely scenario is that with Bitcoin becoming popular in India, the technology behind it, namely blockchain, developing usefulness outside the financial domain, efforts would be made to provide IP protection.
Impact of India’s new Cryptocurrency Bill 2021 on Bitcoin investors?
Analysts believe that the new Crypto-monetary Bill 2021 may affect some current national investors who invest in private digital currencies such as bitcoin. It is because, in accordance to the IMC plan, the Centre’s private cryptocurrency in the nation would be forbidden, creating a loss to the current crypto investors of the country. However, it is not obvious if Bitcoin or Ethereum will be included in the list of private currencies outlawed under the new rule.
It was also suspected that, before its anticipated prohibition, the new anticipated Bill 2021 on cryptocurrency allows holders to exit the asset class but would levy a heavy penalty on the conversion into legal assets. Given that the particular elements of the law remain unrevealed, it is unknown whether or not Bitcoin or any other cryptocurrency owners should market them.
- It is extremely crucial to have a well-structured regulated cryptocurrency with regard to the exchange of cryptos, blockchain technology, and investors involved in this area, which will demand greater attention. such a regulation.
- The Crypto-monetary bill of 2021 is not to be certain, but it is surely the MCA notification that has, to some degree, boosted the expectations of resolving the legal ambiguity in the foreseeable future of virtual currencies/cryptocurrencies in India.
- The Indian Government has deliberated on the destiny of virtual currencies/cryptocurrencies and published several recommendations warning investors that there are virtual currencies/cryptocurrencies dangers in India.
- The latter may suggest a move towards satisfying investors’ expectations in the context of the speculation about the prohibition on private cryptocurrencies under the Cryptocurrency Bill, 2021.
- The underlying disagreement among investors with regard to the legalisation of virtual currencies and cryptocurrencies in India, however, would not rest much trust between the 2021 Cryptocurrency Bill and the MCA Notification.
- The conflicts occur, as, on the one hand, the 2021 Cryptocurrency Bill seeks to prohibit the issuance/use in India of private cryptocurrencies, whereas, on the other, the MCA Notice requires firms to disclose information regarding their virtual currency/cryptocurrency transactions undertaken during the financial year.
- On the basis of inferences derivable from the foregoing facts and the current reality around cryptocurrencies, it is evident that the legislation on cryptocurrencies in India lacks clarity.
The advantages of cryptocurrencies have been emphasised in the draught Blockchain National Strategy 2021 by the Ministry of Electronics and Information Technology. The ban on global virtual money, which has influenced many governments, is thus not an appropriate decision for the progress of our country. The Government must take major efforts to regulate cryptocurrencies to preserve the confidence of investors and of the broader public in the rising country.
“Indian Finance Minister Nirmala Sitharam of Union financial affairs has stated that a complete ban on cryptocurrency will not be implemented – ‘we shall enable some kind of window on the blockchain, bitcoin, and cryptocurrency experiments for people.’ – it will be crucial to take a step backwards and review the government’s proposed cryptocurrency regulations before we move forward”
Furthermore, with the Indian economy being destroyed by the second waving of the new coronavirus, the elevating element of crypto-currency is a very profitable moment on the market.
Approximately seven million Indians have put over one billion dollars into cryptos already and the administration has a difficult challenge in India to enable the Fintech industry to develop and ensure that it is safe to do so.
The government also works on its digital currency although has certain misgivings regarding cryptocurrencies. In the new-age technological revolution, the government will not be left behind and wants to pay in the advantages of blockchain technology. “It is time to use its applications to boost digital infrastructure,” declared Governor Shaktikanta das of the Reserve Bank of India (RBI).