Is Cryptocurrency Legal in India? 2023

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“Is Cryptocurrency Legal in India? A Guide for Beginner Investors: Understanding the Current State and Future Regulations of Cryptocurrencies in India”

Currently, India does not have any specific law to regulate cryptocurrencies. Nevertheless, the absence of such a law does not mean that cryptocurrencies are illegal in India. However, the government has concerns about the risks involved.

Although it’s not illegal, the government is working on rules to regulate cryptocurrencies to address issues like fraud, money laundering, and consumer protection. Earlier, Cryptocurrency was temporarily banned in India in 2018, but the Supreme Court overturned the ban in 2020. Since then, people have been allowed to buy, sell, and trade cryptocurrencies in India through exchanges and trading platforms.

Nirmala Sitharaman, the finance minister; has recently assured that the government will approach cryptocurrencies with an open mind. While the behind this stance is the recognition of cryptocurrencies’ capacity to bring about numerous exciting advancements and innovations.

Keep in mind that cryptocurrency regulations can change, so it’s essential to stay updated on the latest laws if you’re interested in cryptocurrencies in India.

Investment in Cryptocurrency: Here’s What the Ministry of Finance Said on Financial Losses Experienced by Investors and Companies Engaged in Online Cryptocurrency Investments in Parliament.

Two questions regarding the financial losses incurred by investors and companies involved in online cryptocurrency investments were posed to the Ministry of Finance during a parliamentary session.

The first question inquired whether the government had received any complaints regarding financial losses suffered by investors nationwide. If so, they requested details on these complaints and the actions taken by the government in response.

In response, the Ministry of Finance stated that crypto assets are currently unregulated in India. The government has received complaints from time to time on various issues related to crypto assets, including losses resulting from fraud and the inherent risks associated with these assets, which have no underlying economic value and are highly volatile. The National Cybercrime Reporting Portal (www.cybercrime.gov.in) has been established to address such concerns. This portal allows victims and complainants to report all types of cybercrimes, including frauds related to crypto assets. Additionally, the responsibility for the prevention, detection, investigation, and prosecution of these crimes, including financial frauds, lies primarily with the law enforcement agencies of the respective states and union territories, as per the Seventh Schedule of the Constitution of India.

The second question posed to the Ministry of Finance was whether there are numerous companies in the country engaged in the business of online cryptocurrency investment.

In response, the ministry mentioned that through a notification issued on 24th March 2021, the Ministry of Corporate Affairs amended Schedule III to the Companies Act, 2013. This amendment, effective from 1st April 2021, mandates companies to disclose their crypto asset exposures in their financial statements, which are publicly available.

Ministry of Finance statements

“Parliamentary Session Reveals Government’s Response to Misuse of Cryptocurrencies: Measures Taken and Enforcement Actions”

During a parliamentary session, the Ministry of Finance was asked several questions regarding the misuse of cryptocurrencies.

The first question inquired whether the government was aware of the Financial Action Task Force’s (FATF) warning about cryptocurrencies being increasingly used for money laundering, criminal activities, and terrorist financing to avoid detection by regulatory law enforcement agencies.

The Ministry of Finance responded by stating that the FATF Plenary had discussed and adopted amendments to the FATF Standards, addressing the growing use of virtual assets for money laundering and terrorist financing. These amendments clarify the businesses and activities to which the FATF requirements apply in the case of virtual assets. Exchanges and wallet providers will be required to implement anti-money laundering/combating the financing of terrorism (AML/CFT) controls, obtain licenses or registrations, and be supervised or monitored by national authorities. Strengthening these standards is part of the FATF’s comprehensive approach to prevent the misuse of virtual assets for illicit purposes.

The second question asked whether the government was aware of instances where cryptocurrencies had been used for money laundering and the estimated amount of laundered money detected by different monitoring agencies.

The Ministry of Finance responded that the Enforcement Directorate was investigating several cryptocurrency-related cases under the Prevention of Money Laundering Act, 2002 (PMLA), and the Foreign Exchange Management Act, 1999 (FEMA). As of the given date, proceeds of crime totaling Rs. 953.70 crores had been attached, seized, or frozen. Additionally, five individuals had been arrested, and six Prosecution Complaints (PCs), including one supplementary PC, had been filed before the Special Court, PMLA, in these cases. Under FEMA, assets worth Rs. 289.28 crores had been seized under section 37A, and a Show Cause Notice had been issued to the cryptocurrency exchange Zanmai Labs Pvt Ltd (known as WazirX) and its directors for transactions involving cryptocurrencies worth Rs. 2,790.74 crores.

The final question asked whether the Reserve Bank of India (RBI) had any control over monitoring cryptocurrencies.

The Ministry of Finance answered that the RBI had been cautioning users, holders, and traders of virtual currencies (VCs) through public notices issued on December 24, 2013, February 1, 2017, and December 5, 2017. These notices highlighted the potential economic, financial, operational, legal, customer protection, and security-related risks associated with dealing in VCs. The RBI, through its circular dated May 31, 2021, advised its regulated entities to continue conducting customer due diligence processes for transactions involving VCs, in accordance with regulations governing Know Your Customer (KYC) standards, Anti-Money Laundering (AML) measures, Combating the Financing of Terrorism (CFT), and obligations under the Prevention of Money Laundering Act (PMLA), 2002, among others.