Cryptocurrency in India: Empowered in 2020?

Abstract

Cryptocurrencies are distinguished from traditional currencies by way of their operation as a medium of exchange through the use of blockchain technology and their freedom from a central authority, regulatory or otherwise. While cryptocurrencies enamoured the world and the number of interested parties grew, governments of different nations became apprehensive of their potential dangers. India was no different, however since there was no explicit ban, cryptocurrency business slowly started becoming prominent locally. In April 2018, the Reserve Bank of India issued a circular which barred banks and other financial institutions from facilitating transactions involving cryptocurrencies. Subsequent to a challenge, the Supreme Court of India set aside the said circular which resulted in a temporary respite for cryptocurrencies. This paper adopts a comparative understanding of how other countries have responded to the growth of cryptocurrency business so as to determine their future in India. With this approach, it becomes apparent that only a permissive framework will benefit Indian regulators in addressing the risks associated with cryptocurrencies. If undertaken properly, such an approach has the potential to boost India’s economic growth and make it an epicentre of industrial development. It is concluded that at the heart of cryptocurrency regulation lies the challenge of correctly classifying crypto-assets and identifying appropriate regulators. It is only a carefully calibrated legal framework that will protect the interests of stakeholders and enable blockchain-based growth in India.