RESEARCH QUESTIONS
- What steps are taken up the ruling government of India in regards to the cryptocurrency?
- Will the citizens of India be able to participate in the global market with the virtual currencies?
- Can there be freedom of having the virtual currency without any restriction so that citizens can enjoy their right with liberty?
- What is the role of the cryptocurrency and the Insurance and do they work together in the contractual aspects or not?
RESEARCH OBJECTIVE
- For the better understanding to the common people about the Cryptocurrency.
- For making the common people understand the effects of such supressing their right by not allowing them to participate in the global market in the matter of the usage of the cryptocurrency.
- To make the common masses understand the repealing or amendment required in the matters of the usage of the cryptocurrency.
- To make the common masses understand the opinion of the legal fraternity on laws and regulations of the cryptocurrency.
- To make the common masses aware by participating in this research and studying
Abstract
The asset in the modern world is a currency which is called Cryptocurrency. Most people assume that there would be no tax on cryptocurrency but it is false, like any other transaction, cryptocurrency transaction has no tax benefit rather it has tax like any other currency or asset. Not only income tax and wealth tax cryptocurrency have a tax named as capital gain tax as well as wealth tax. In cryptocurrency even if you have a void or illegal transaction you are supposed to pay tax and it has been empowered by the Tax law in such a manner. In the year 2014 it has made clear to all the people interested in investing in Bitcoin that their would-be collection of the capital gain taxes in the cryptocurrency has been made clear by the Internal Revenue Service which is in the United States of America. This research paper would analyse the legal issues in Cryptocurrency and what are the risks that are to be taken by the owners of the cryptocurrency and what would happen to the owned cryptocurrency by the owners when counterfeiting happens in cryptocurrency. Therefore this research paper would explore the risks and caution that should be taken before investing in the cryptocurrency.
Introduction
The developing nations and the developed nation super powers, in the dynamic societies where the changes takes place rapidly are all now in the competition for be on top position in the market across the world in the changing dynamics of the globalization era. The human needs are making a lot of changes in the technological aspects around the world. For the goods exchange process in the early days we used to use the barter system and it was one of the earliest system which was available for the exchange of goods and services and for the trade with other countries. The earliest type of currency used was coins for these exchange of services and goods but now has the time is passing and now that we are decade ahead of the barter system now there is a requirement for the new exchange system for the goods and exchanges across the globe. In the world right now the most famous and preferred currency are the credit cards and the debit cards but back in the embryonic period the coins were made from gold and silver or any other metal as well. This situations and periods explains us about the dynamic changes in the evolution of the currency. The cryptocurrencies have taken their birth finally by bursting into the new world of currency, by being a technology type which is new and is real by just collecting some codes which would be in the form of calculations of mathematics which perhaps giving a leap up to the technology of block chain. The worth of the bitcoin, the total capitalisation of market would be constituting around 54.33%[1] in 2018 year and it is holding the cap of the major market across the globe. The newest to the bitcoin is the Ethereum and it is the newest form as well and it is constituting around 8.69%[2] in the year of 2018 of the cryptocurrency in the total market capitalisation.
Technology of Transaction and the Block Chain:
The protocol of communication which is now virtual and helps in the easy payments electronically is a Bitcoin. There were some group of developers who were anonyms who have stated in their research paper first, that’s how it all started. From that point it was serving huge number of transactions with average of 330,300[3] daily number of transaction of the bitcoin in the year 2020 during the month of December and around 400,000[4] would be achieved in the month of January during the year of 2021. The most important feature of the technology of block chain is that it has the capacity to solve the authentication problems without including any of the intermediaries of trust and therefore it is considered to me very disruptive in nature. There was no influence from the lawyers’ side in framing the regulation and rules of the bitcoin as it was the anonymous engineers who framed the rules and regulations. When compared to any other payment forms, the system of block chain has more flexibility and it’s more of privacy involvement and is amenability nature is also very less and this was believed to be possible by its rules and regulations[5]. The scarcity principle was used to design the Bitcoin. The precondition of scarcity is used in the process of ascribing the value to the money of any type. Counterfeiting can be tackled only by the precondition of scarcity, because of this bitcoin is based on the principle of scarcity. In the present era for the sake of records to be bookkept because of the electronic form of money, scarcity is used so that it can be protected by the rules and regulation which are of legal nature so that it will be ensuring the authenticity while the records are being bookkept. The user of the bitcoin will be able to be in a position to identify and to verify all his transaction which are made previously through block chain because if any transaction which takes place old or new in the network of the bitcoin would be together grouped in the recent transactions in the form of a block. Now the individual stack of technologies are being focused apart from the bitcoin and the companies involved are Filament, Eris and Ethereum which is the newest form of the bitcoin and they are also in race for looking beyond the bitcoin.
The new era currency – virtual currency and its legal view point:
There was a bill that was drafted by the government because it was recommended by the RBI and other experts. Because of the banning news which out broke into the society all the people who started their investments in the crypto market were shocked and spooked at that time and they were all panicking for this mere news that leaked and it was not known to anyone if it was true or not . At that point of time all the people or the investors who invested in the virtual currency started to offload all their investments in the cryptocurrency and they were all racing each other investors to offload all their currency which they invested in the crypto markets. But the fact was that the government was all already to put a ban on all the currencies of the crypto market that was out across the globe in India but the government also gave a thought on introducing currencies which would be digital in nature and also it should be mined by the RBI itself and there would be ban on the private digital currency in India for sure. The government also gave a thought on allowing the currency which is digital in nature of the foreign as well but it should also a compulsion for the RBI to authorise as well. All the people who would still involve themselves in the transactions of the cryptocurrencies which are private would face huge penalties and the imprisonment and it could made very strict in India by the Government of India. Therefore by this situation we can understand that in the government point of view cryptocurrency was a big no to the ruling government and they were all ready for the ban on the virtual private cryptocurrency. The committee of the Inter-Ministry has sent out their report to government and their recommendations to deal with the new currency which is virtual in nature. The report was titled as “Report of the Committee to propose specific actions to be taken about Virtual Currencies”. The committee was very much against the private cryptocurrency market and their investments and it proposed for the ban on the same and also suggested for criminalisation of private cryptocurrency dealings. Therefore the draft of the above mentioned bill was completely based on the report submitted by this committee. The government has thought on the basis of the financial prudence and therefore it was very much valid for the government to take a path which is completely different from that of putting a ban on the cryptocurrencies and its usage[6]. To tackle the present situation the government had to choose a responsibly more fiscal method which is possible through the policy of the taxation. The government has stated that for the rate of 1% of the tax deposition and the deduction will be require for any purchase or transfer of these virtual private cryptocurrencies. And also it was fixed at the rate of 30% for the tax and it will be taxed on the investors earned income for the trading of the investors in the cryptocurrency.
Cryptocurrency and their legal aspect – What Governments as to say?
The lack of the framework for the regulation of the cryptocurrencies in India is the problem for the existing ruling government in India. And the currency decentralization for the ruling government is a complicated task for them as well. In the cryptocurrency, Indians own more than ten thousand crore according to the statistics provided by the government. The Supreme Court has allowed for the legalisation of the virtual currency i.e. the cryptocurrency in India while the government and other expert committees are trying to keep a ban on the cryptocurrency and also to criminalise the same. Now the government after the Supreme Court trying to legalise the process of the virtual currency, it has consulted many of the stakeholders and a appointed a panel for the same and they are trying to come out with many possibilities to enhance the virtual currency in India as well so that India would be a part of the global market as well. The Government has taken into consideration the interest of the citizens of India to invest in the cryptocurrency or the virtual currencies and also to be part in the global market and the government is also ensuring in the use of the technology of the block chain through with the transaction of the cryptocurrencies take place. By this situation the citizens understood that the Government was always worried about the private cryptocurrency transactions because it was not authorised and its usage was always considered to be illicit and also the government was concerned about the Financing as well which was also in the nature of the illegitimacy. Therefore the citizens understood that the government was always in the favour of the new technology of the virtual currency but no the private usage of the cryptocurrency which was unauthorised. They were many countries such as the United Kingdom and also Germany for instance and these countries have choose to make adjustments in their taxation policies and make sustainability as their main theme for their economies. Germany made it clear for the bitcoin to be a money which is to be private in form and it recognised the same as well and it made bitcoin as well to be part of the subject of private money and taxation and hence the same taxation will be followed to bitcoin which was followed for the other forms of the private money[7].
Challenges Faced and Issues addressed in the Cryptocurrency Transactions:
There are many difficulties which are in the nature of the financial matters and also in the nature of the security issues for the Cryptocurrency and it is not yet scored its immunity from the above mentioned problems. The counterfeit of the cryptocurrency can be possible from all the dimensions of the cryptocurrency because if the hackers can hack the system which is in operational nature of the currency which is virtual then the hackers can hack complete transactions made by all the investors across the world and the hackers can easy go way with all the hard earned money from the investors across the globe in the global market and all the market globally will fall and all the markets in all the countries would affect and therefore it will result in the fall of the economy of the each country. Cryptocurrency is offering a mode of payment which is very attractive in nature and is also very novel when compared to other forms of the payment mode. If the government finds some way to regulate the framework of the cryptocurrencies and the block chain transaction, then the citizens of the country would use and avail the advantages which are offered by the cryptocurrencies across the globe. The governments are supposed to make clarifications to themselves and they should not be in a position where they lack the knowledge of the functions of the cryptocurrencies and the transactions made in the block chain and they should also not be lacking on the clarifications about the same topic[8]. The government should have trust and have the intention in allowing its citizens to invest in the cryptocurrencies because it would benefit the investors because they would get the opportunity to compete in the global market and this will help the government itself indirectly because the economy of the India would see growth from the major hit which it received during the corona virus times. Government should take care for citizens about the matters of the concerns which are numerous in count with regards to the Bitcoin usage and these concerns are effecting the trust of the investors for their investments in the block chain transactions. When the citizens are making continuous efforts for their participation in the global market of the cryptocurrency and the block chain transaction and it is mandatory that the government should recognise the efforts made by the citizens and the government should make sure that these efforts taken by the citizens who wants to invest are addressed and also it’s the function of the government put their efforts in installation of the faith and trust in the investors so that they can be secured and backed by the government in their investments in the block chain transactions.
The Intervention by the Judiciary and the attempt of Legalisation of the Cryptocurrency:
Apex Court has played a huge role in Cryptocurrency and its legalisation. The Industry of Digital Services and the IMAI – “Internet and Mobile Association of India” in the Apex Court, they filed a writ petition. RBI’s circular has caused a huge amount of loss to many of the investors in the cryptocurrency. The investors in the cryptocurrency are not in the position of accepting the circular above mentioned issuing and the investors point is that it’s very hard to reduce the transaction on immediate effect is something next to impossible and it’s very hard for the sustainment of the investors if they cut short their transaction when there is huge increase of value to the crypto every day and of course on the basis of the operational grounds. The investors argued that it is a violation of their “fundamental right under article 19(1)(g) of the Constitution of India”.
The Supreme Court of India has quashed the RBI’s given circular on the topic of the cryptocurrency and has given in its judgement in the favour of the “Internet and Mobile Association of India” in the landmark case of the Internet and Mobile Association v. RBI[9]. The judgement passed in this case was 180 pages long judgement. The court decision is that the RBI has to legalise and it should regulate and empower the citizens to invest and participate in the global market through the block chain transactions and rather because of the loopholes RBI should not take a step back and try to be on the side of the banning of the cryptocurrency. There are many obstacles in legalisation of the cryptocurrency in India but the RBI and the ruling government should take appropriate measures and should legalise it in India and should allow citizens of India to participate in the global market and therefore then it would not lead to the violation of the citizens “fundamental rights provided in the Constitution of India”.
The Crypto Assets – Insurance and from the perspective of the Legal:
The contract of Indemnity includes in itself the contract of insurance. So it can be told that if the person had suffered any loss with the policy stating that the insured can be entitled to pay only the loss which is actual and it is only subjected to the policy’s overall value. It can also be said that the insured in any of the way cannot profit from the policy from its buying and in none of the cases the amount which is paid in case its exceeding and that the lost, despite the fact that the policy was bought for a higher than expected amount. The insurance contract is more beneficial to the insured obviously when compared to the insurer because the insured has to be very frank and he has to share all the subject matters details and he has to also include any of the matters which would perhaps effect in increasing the risk perception by the insurer so that its being underwritten as well. The lender has the insurance entitled and the amount being interests of the insurable and that can be either of the financial or the pecuniary but of course not emotional and the insured should definitely have the interests in an insurability as well so that the insured asset would then be mortgaged to the right person.
The insurer will further not look into any matters which cause the losses but he would probably use the concept of the “causa proxima” which would help him determine the cause of the nearest of the losses under the cause of the losses. The insuring of the assets which are digital in nature and to determine their point of ascertaining the feasibility would actually be possible only by ascertained checking out of the principles of the insurance and their extent that can essentially be applied directly to the assets which are digital in nature and it could be also assessed about their requisites which are necessary so that they would qualify for the subjects insurance. The major way to declare the purpose and all the intents would be by detailing the owners who were previously involved in the assets. In the situation where there could be any kind of the assets damage and also loss of huge amount then it would be sorted out via the all intents and purpose methods and it would end up in the determination of the loss associated with the actual loss and then it would be making the entire belief which is popular to the contrary and it would be the feasible method[10].
Conclusion:
The ban on the cryptocurrency will not allow the citizens of India to participate in the global market and invest in the block chain. The participation in the market across the world would lead to the increase in the economic aspects for the country as well. The investors were out of the place and panicking through when the RBI released the circular. It’s very unfair on the part of the investors who invested all their money in the virtual currency and then when the value of the cryptocurrency like bitcoin and the ethereum where increasing they would receive profits and at that same period of time RBI circular was taking briefly about decreasing the transactions and that would lead to huge losses for the investors who have invested all their might in the virtual currency. It is the responsibility of the government to help the citizens and to ensure their interests are not quashed because things are complicated and their regulations are even more complicated. Stopping people from participating in the global market through the crypto would definitely lead to the violation of their fundamental rights and it would be the result for the democracy losing its importance. The Supreme Court of India is in favour for the citizens to take part in the block chain and to not violate their fundamental rights.
Placing the investors who invested in the block chain in such a position where they can’t even with draw their money and all of a sudden banning the cryptocurrency would lead hug losses to the people who have invested their money in it. Cryptocurrency is a new age currency which would be perfect for the modern era if it was properly regulated and legalised across the globe. The problem which is real huge right now in the crypto assets is that the majority of the assets of the crypto are not insurance and not even covered to be under the insurance and it would not give a positive impact for the country to regulate and legalise the crypto assets. The potential for the crypto assets is immense and its growth would lead to a new global era all together. In India it would possibly lead to having the banks which are also virtual in nature and it would be possible only with the technologies of the block chain and the internet as well. The Distributed Ledger Technology should be utilized by the RBI so that it would help the RBI and the ruling government to possibly regulate and legalise the cryptocurrency in India and it also allow the RBI and the government to explore all the possible reasons through which they could take a step towards the cryptocurrency and its access to the citizens of the country. The fin-tech products will also see the light in India in the new global era in the modern world if the crypto is legalised and regulated in India. This would be a huge opportunity for the country like India to across all its economical-socio barriers in the societies and it would give its citizens a wide range of the financial access. The prohibition of the cryptocurrency and the block chain transactions in India would not seem to be the best idea and its banning in the country especially like India will not allow the progress and growth and it is being used in many countries, so India should definitely explore the possibilities and make the decisions for the good of the country as well the investors. Because of the new generations and also the younger generations, their interests is all over the digital assets and of course the use of the technology is going to have growth and end of the day they would lead towards the crypto or any other virtual currencies and new discoveries or inventions in the technology. Therefore I would like to conclude on the optimistic note as the future of crypto in India would possibly lead towards developments and it appears to be good.
[1] https://www.sciencedirect.com/science/article/pii/S1386418122000544
[2] https://www.marketscreener.com/news/latest/Ethereum-Lost-8-69-to-1011-67-at-5-p-m-ET-Data-Talk–40870894/
[3] https://www.statista.com/statistics/730806/daily-number-of-bitcoin-transactions/
[4] https://www.statista.com/statistics/730806/daily-number-of-bitcoin-transactions/
[5] https://articles.manupatra.com/article-details/Cryptocurrency-in-India-Regulatory-Challenges-and-the-way-forward
[6] https://3fdef50c-add3-4615-a675-a91741bcb5c0.usrfiles.com/ugd/3fdef5_9b93be18b81d429f831517de5a4c41ec.pdf
[7] https://articles.manupatra.com/article-details/Is-banning-Cryptocurrency-more-fruitful-than-Regulation
[8] https://news.bitcoin.com/venezuelan-banks-have-blocked-over-75-accounts-since-the-end-of-last-year-due-to-cryptocurrency-related-activities/
[9] https://indiankanoon.org/doc/12397485/
[10] https://3fdef50c-add3-4615-a675-a91741bcb5c0.usrfiles.com/ugd/3fdef5_6e812ce9454c4ec9b727fffdce4df540.pdf
