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    Cryptocurrency Legal Issues

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    Ishaan Mundeja
    This document discusses some of the legal issues related to cryptocurrency in India. It notes that cryptocurrency transactions are currently anonymous in nature and fall outside of existing Know Your Customer (KYC) norms prescribed by the Reserve Bank of India. It also explains that the Foreign Exchange Management Act regulates cross-border transactions, but cryptocurrency enables cross-border transfers in a manner that may conflict with this law. Additionally, the document outlines complications around applying India's evolving taxation rules to cryptocurrency activities like mining and transfers if it became a recognized legal tender.

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    Cryptocurrency Legal Issues

    Uploaded by

    Ishaan Mundeja
    59 views2 pages
    This document discusses some of the legal issues related to cryptocurrency in India. It notes that cryptocurrency transactions are currently anonymous in nature and fall outside of existing Know Your Customer (KYC) norms prescribed by the Reserve Bank of India. It also explains that the Foreign Exchange Management Act regulates cross-border transactions, but cryptocurrency enables cross-border transfers in a manner that may conflict with this law. Additionally, the document outlines complications around applying India's evolving taxation rules to cryptocurrency activities like mining and transfers if it became a recognized legal tender.

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    This document discusses some of the legal issues related to cryptocurrency in India. It notes that cryptocurrency transactions are currently anonymous in nature and fall outside of existing Know Your Customer (KYC) norms prescribed by the Reserve Bank of India. It also explains that the Foreign Exchange Management Act regulates cross-border transactions, but cryptocurrency enables cross-border transfers in a manner that may conflict with this law. Additionally, the document outlines complications around applying India's evolving taxation rules to cryptocurrency activities like mining and transfers if it became a recognized legal tender.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    59 views2 pages

    Cryptocurrency Legal Issues

    Uploaded by

    Ishaan Mundeja
    This document discusses some of the legal issues related to cryptocurrency in India. It notes that cryptocurrency transactions are currently anonymous in nature and fall outside of existing Know Your Customer (KYC) norms prescribed by the Reserve Bank of India. It also explains that the Foreign Exchange Management Act regulates cross-border transactions, but cryptocurrency enables cross-border transfers in a manner that may conflict with this law. Additionally, the document outlines complications around applying India's evolving taxation rules to cryptocurrency activities like mining and transfers if it became a recognized legal tender.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    4.

    LEGAL ISSUES RELATED TO CRYPTOCURRENCY

    Cryptocurrency is digital money that is not backed by the government. 1 It acts just like any
    currency and can be used to purchase goods and services. The digital currency allows the
    individuals to anonymously purchase goods and services online. The transactions entered into
    with the help of bitcoins are recorded in centralised public ledger. The private nature of the
    transactions under cryptocurrency provides a wide ambit for undertaking criminal
    transactions. In addition to that, legalising the cryptocurrency could even lead to increase in
    white collar crimes like tax evasion. The principal laws concerning Indian currency are, The
    Constitution of India, 1950, The Foreign Exchange Management Act, 1999 The Reserve
    Bank of India Act, 1934, The Coinage Act, 1906, The Securities Contracts (Regulation) Act,
    1956, The Sale of Goods Act, 1930, The Payment and Settlement Systems Act, 2007, Indian
    Contract Act, 1872. If cryptocurrency becomes a legal tender in our country, it would come
    under the purview of these legislations but till then the use of cryptocurrency possess various
    legal complications and issues, such as:

    4.1 RBI Prescribed KYC Norms

    In India, KYC (Know Your Customer) norms are prescribed by the Reserve Bank of India.
    These norms require the banks to keep an up-to-date record of their customer’s identity and
    monitor their monetary transactions. The norms would not be applicable on cryptocurrency as
    its transactions are anonymous in nature. Thus, cryptocurrency possess a major legal issue in
    this regard.

    4.2 Cross Border Transfer


    The Foreign Exchange Management Act, 1999 regulates all inbound and outbound foreign
    exchange related transactions. The Act provides that no person should “deal in or transfer any
    foreign exchange or foreign security to any person not being an authorized person; 2 The

    1
    Edward V Murphy, Cong. Research Serv., R43339, Bitcoin: Questions, Answers, and Analysis of Legal, 2015,
    1.”

    2
    Foreign Exchange Management Act, 1999, Section 3
    cryptocurrency acts as a cross border currency and can lead to major legal issues in this
    regard.

    4.3 Taxation
    Taxation rules in India change continuously and dynamically, leading to a lot of
    complication. The introduction of GST and its implication acts as a proof. Tax may be
    applied on either the income or the expenditure. If cryptocurrency becomes a legal tender,
    then first thing would be to differentiate between expenditure and income related to
    cryptocurrency. If taxes are levied on cryptocurrency then those would be applicable to
    mining of cryptocurrency as well as transfer of cryptocurrency and with that we need to
    differentiate whether the cryptocurrency come under the category capital or income. 3

    3
    Nishith Desai, Bitcoins- A Global Perspective Indian Legal and Tax Considerations, March 2015, available at
    http://www.indiabitcoin.com/wp content/uploads/2015/03/NDA- IndianLegalConsiderations-Bitcoins.pdf.”

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