The popularity of cryptocurrencies in India began around 2013 when small businesses adopted bitcoin as their payment method. Since then, these currencies have grown as a means of investment, as evidenced by the emergence of numerous digital currency exchanges. Press releases released in July 2018 show that the Government of India has clarified its position on digital currencies and is working with various industries to publish detailed instructions on these currencies.
Many digital currency enthusiasts have long petitioned the government to make these currencies transparent by filing a lawsuit with the Supreme Court of India. In this regard, two lawsuits were filed against the Ministry of Interior and the Ministry of Finance, followed by an instruction declaring the sale, purchase, and investment of digital currencies illegal. Following the publication of this directive, some industries demanded that the rules of this directive be changed. But despite the Supreme Court’s acceptance of these lawsuits, digital currency matters and laws are still pending. Various arguments show that India’s lack of clear rules regarding digital currencies can lead to multiple risks.
The Indian Parliament has passed the RBI Act, which sets out interbank rules, and the Coinage Act, the law on coins. Under Article 26 of the RBI Act, there is no penalty for using digital currencies as a valuable asset.
In India, payment instruments and systems are regulating by the Payment and Settlement System Regulation (PSSA). These products are classifying into two broad categories. One is credit cards, also called e-wallets, and the other is payment software, sometimes called digital money. The proposed category is extensive and can include digital currencies. By referring to PSSA, it can see that e-money is not explicitly defining in it. Still, payment systems that provide electronic money transfer capability are limited, and its rules state. For digital currencies to group with other currencies and their rules extended to these currencies, they must store some of the value of the money. But most digital currencies have no intrinsic value, and their value, if any, depends on market supply and demand. Therefore, as currently seen in the Indian Financial Regulations, digital currencies cannot be considered electronic money or a sound payment system in India.
Digital currencies can easily be used in international and overseas transactions and can generally convert to Fiat. According to instructions issued by the RBI on January 1, 2016, an Indian resident can send or receive up to $ 250,000 a year to another person in another country.
The lack of clear legislation by the Indian government has not been able to prevent active participants in this field in India. For example, digital currency exchanges are considering adding peer-to-peer trading capabilities to their platforms. Given the growing market and high potential of digital currencies, the Indian government is likely to change some of its rules and take a more balanced approach to these currencies.
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