Cryptocurrency: Its Legal and Regulatory Dilemma – Jammu Kashmir Latest News | Tourism

Dr. D. Mukhopadhyay The digital currency called Bitcoin, first appeared in January 2009, the brain child of the pseudonym, Satoshi Nakamoto. Bitcoin is devoid of any intrinsic value because it is not redeemable for a certain amount of another commodity. It has neither physical form nor legal tender nor attributed to any statutory characteristic of a legal entity and the central bank of the country has no control over the provision of this digital currency. Bitcoin’s circulatory system is completely individualistic in private since no financial institution or regulatory authority is associated with financial transactions held through Bitcoin. Bitcoin is based on the foundation of cryptography, which means that no third party view is able to visualize the communication. Every Bitcoin and every user is encrypted with a unique identity, every transaction is virtually recorded in a decentralized public ledger technically known as a blockchain aka distributed ledger and it is visible to all computers in place on the network. It never reveals any personal information regarding the parties involved in a virtual transaction via Bitcoin. Bitcoin-based transaction is becoming popular day by day because it involves low transaction cost, guarantees confidentiality and is devoid of inflationary influence the consequence of which is not the erosion of purchasing power. Bitcoin’s purchasing power is not determined by the demand-supply device, but is purely based on speculation and the market is volatile in nature. In the given operational context, it is observed that each country is gravely concerned about its legality, cross-border movements and misuse to create unwanted geopolitical instability and a threat to the internal peace of a country, as it is capable of fomenting financial crimes both nationally and internationally, as a result, controlling domestic and cross-border crimes on the one hand and peacemaking on the other becomes very expensive for any country including India. The law on the national and international scene is the essential force to face any crime. It may seem factual that the law is barely observed as being proactive, but it was mainly born out of a philosophy of reactive and failure maintenance and history is witnessing to mean that the laws are always far behind the speed of technological advancement that is the order of the day in the 21st century. It has been observed that almost all governments in all countries have initiated their reactions against the unprecedented challenges that cryptocurrency has posed. Cryptocurrency has forced the government and other allied institutions to consider and structure certain laws and regulations in order to oversee and maintain the use of Bitcoin as an alternative to existing legal tender in a disciplined, controlled and transparent manner so that the public treasury is properly endowed with tax as usual on the profit resulting from Bitcoin transactions and transactions under pseudonym are within the scope of administrative control. Immediate issues related to licensing law, tax law, financial criminal control laws such as money laundering, foreign exchange management, cyber laws, Indian penal code, Indian penal code procedures, of great importance are civil laws and civil code procedures regarding electronic commerce, Benami transaction, -border transactions, underworld transactions. In the given spectrum, the government should understand that banning bitcoin or cryptocurrency transactions will not serve the purpose, as cryptocurrency has emerged to stay for a long time, signifying an evolutionary advance in science and technology, management process to avoid time and cost. Prone economic transactions are dominant forces driving society to embrace Bitcoin. Following the emergence of this new digital currency, legal issues related to legal tender, the definition of Bitcoin in terms of “commodity”, “assets” “income” “capital”, legal identity, regulation and Monitoring transactions through Bitcoins are a major headache for any establishment. . The federally mandated US Congress has tasked the Government Accountability Office (GAO) through the Senate Finance Committee to review tax implications requirements and risks of non-compliance. In SEC v. Shavers, a Federal District Court defined Bitcoin as “an electronic form of cashless, non-asset backed real money, such as a ‘coin or precious metal,’ which is formally recognized as the supply of Bitcoin no. It is not regulated by any government or by a central bank, but it is based on an algorithm that helps structure a decentralized system of peer-to-peer financial transactions. In order to fight against any fraud and any financial crime, the SEC vs WJ Howey ratio has been adopted by the SEC, which means that financing instruments using “Bitcoin” fall within the formal meaning and definition of state security. -United. The Shavers Court and the SEC. observed that transactions through Bitcoin had passed the “Howey’s three-factor tests” since it turned out that transactions were involved in investing in the form of money or investing in silver, secondly, transactions were carried out in a joint venture and finally the transactions had been observed as having aimed at obtaining profits in order to meet the motivations of the promoters or a third party and these characteristics of the transaction made the cryptocurrency a legal umbrella in under the US Securities Act which requires token issuers to either comply with registration requirements provisions set forth by the SEC or obtain formal exemption from them. Additionally, the Commodity Futures Trading Commission (CFTC) has determined that Bitcoin and other virtual currencies are “commodities” under the US Commodity Exchange Act. The CFTC has taken action against ‘Bitfinex’, the company, which operated an online exchange and trading platform to deal in cryptocurrencies without registering and without meeting ‘real delivery’ standards. In early 2021, China banned Bitcoin completely and introduced its own digital currency instead. The Indian scenario for dealing with Bitcoin transaction issues is quite different from that discussed. In April 2018, the RBI, the money and money market regulator, being the country’s central bank, drafted a regulation prohibiting banks and financial institutions from providing their services to any entity dealing in or using virtual currencies. A case calling into question the validity of this regulation has been challenged by a group of private entities before the Supreme Court of India. The Supreme Court heard the Internet and Mobile Association v. Reserve Bank of India and rendered its judgment on the basis of Article 19 (1) (g) of the Constitution according to which trading in virtual currencies is a constitutionally protected right. as long as there is no legislative prohibition. Simply put, the RBI has the power to regulate virtual currency transactions, but the imposition of a ban by it is disproportionate and unconstitutional. Therefore, at present, there is no legal basis for the mentioned ban and the RBI’s action although said regulations are null and void. The Indian government had planned “the Cryptocurrency and Official Digital Currency Regulation Bill, 2021” during the winter session of Parliament. A complete ban on cryptocurrency is not advisable at all as it is very likely to help the underground payment system which is essentially decentralized and almost beyond the grip of the regulator. Countries banning cryptocurrency include Qatar, Tunisia, Egypt, Iraq, Morocco, Algeria, Bangladesh, Bolivia, Turkey, Indonesia, China, and countries where Bitcoins can be used anonymously to complete transactions include, in addition to the United States, European Union, Canada, Australia. , El Salvador, Denmark, France, Germany, Iceland, Japan, United Kingdom, Switzerland, Singapore, United Arab Emirates and so on. In short, it can be observed that there are, so far, three types of approaches to manage cryptocurrency, such as countries implicitly prohibiting completely and countries legalizing cryptocurrency transactions through regulatory measures. According to the global analysis, the American approach in the processing of cryptocurrency transactions is very clear in the procedural procedure because it does not call into question the legal validity of sub-cryptocurrency transactions. underlying as long as the underlying securities are registered or obtained by exemption. However, the SEC has created a Cyber ​​Unit to deal with cybercrime-related misconduct, fraud and market abuse in an inclusive manner. On the contrary, the CSRC being China’s regulator to combat the evils of cryptocurrency, as it views cryptocurrency transactions as nothing more than an evil Pandora’s box. The approach and legal procedures adopted by the United States can be followed as a guide to curb cryptocurrency transactions, as this amounts to fomenting illegal or terrorist activity. India should fully take into account the experiences of countries banning cryptocurrency, prohibiting and implicitly legalizing virtual transactions through Bitcoins, as this can be of great help in the legislative process and enact legislation with adequate teeth. to curb the threat resulting from Cryptocurrency transactions harm the economy as a whole and finally protect the parties involved in augmented cryptocurrency transactions legally and financially, otherwise it is likely a serious internal threat and external for the country, taking into account the maxim “a point in time saves nine”. (The author is a practicing lawyer, High Court of Calcutta