The legality of cryptocurrency in India is a long-debated topic in the financial industry. Today, in the annual budget speech, Indian Finance Minister Arun Jaitley gave a clear picture of the government’s stance on the exploding digital currency economy, and it does not look good for cryptocurrency enthusiasts.
The minister made it clear that the government does not consider cryptocurrency to be legal tender and also stated that the central government will do everything in its power to curb the use of Bitcoin and other cryptocurrencies in its jurisdiction.
In his speech, Mr. Jaitley said: “The government does not recognize cryptocurrency as legal tender or coin and will take all measures to eliminate the use of these crypto assets in financing illegitimate activities or as part of the payments system.”
It is now possible that the government could introduce new legislation making all cryptocurrency transactions illegal. Quartz quoted Monish Panda, founder of Monish Panda & Associates law firm: “The government will now either come out with a legislative mechanism or make suitable amendment in existing legislation to ensure that dealing and trading in cryptocurrency is made illegal and to penalise entities and individuals who are involved in their trade and circulation. We will have to wait and watch as to what will be the final framework of such legislation.”
But on the positive side, Mr. Jaitley praised the underlying technology of Bitcoin – blockchain technology – and encouraged its use in payment systems.
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Indication of the importance of crypto
Despite the government’s strong warning, the Blockchain and Cryptocurrency Committee of India (BACC), which counts India’s leading cryptocurrency exchanges among its members, is quite positive about growing the digital ecosystem.
Ajeet Khurana, the newly appointed head of BACC, commented: “Hearing the Finance Minister talk about Cryptocurrency on Budget day is clear indication of how important and widespread this technological innovation has become in India. BACC welcomes the statement, and reaffirms our unstinting assistance to the Government, and all regulators, in helping evolve a robust ecosystem for Cryptocurrencies.”
Earlier this month, a few top lenders in India suspended the accounts of multiple cryptocurrency exchanges.
As a part of the KYC process, cryptocurrency exchanges in India are verifying government-issued IDs like PAN and AADHAR for all of their clients, but still, the government fears the use of cryptocurrencies in money laundering and other illegal activities.
Last month, in an official statement, the Finance Ministry even compared Bitcoin to a Ponzi scheme. The Reserve Bank of India, after forming a committee to study digital currencies, also made it clear that it is not a supporter of Bitcoin or any other decentralized currency.
Though the use of cryptocurrency is limited in India, it has created waves among investors. According to a recent study, India accounts for 10 percent of all Bitcoin transactions worldwide, so hard-line legislation could have major ramifications.