A cryptocurrency is a digital currency that does not typically exist in a
physical form, unlike banknote currency which is issued by the central bank. It
is a concept designed to work as a wherein individual coin ownership records are
stored in an existing in a form of a computerized using to secure transaction
records, to control the creation of additional coins, and to verify the transfer
of coin ownership.
It ideally uses a decentralised permission system of operation as opposed to the
traditional system of operation, a network of records that contain distributed
ledger in an electronic encrypted form known as blockchain technology.
As the market value of these cryptocurrencies also eventually started to
appreciate, many people in India too started to invest in cryptocurrencies
through a various trading platform available in the market from time to time.
However, just like a traditional stock market, cryptocurrency too had its own
ups and down in value as an asset while some earned profits and some earned
losses. When the trading gradually increased at a noticeable volume. Like other
governments and regulators around the world, It invited the attention of the
Government of India as well as the banking sector regulator the Reserve Bank Of
This posed various questions to investors, government and regulators alike.
Position of Law
This brings us to the important question is cryptocurrency legal in India?
There is no straight answer to this as the position has been shifting like a
The journey is thus so far:
In the year 2013 the banking regulator issued a press release dated December 24,
2013, by Reserve Bank Of India. Wherein it cautioned the people about the usage
of cryptocurrencies and the legal and consumer protection and security risk they
are exposed to. It also further mentioned The Reserve Bank was examining the
issues associated with the usage, holding and trading of cryptocurrencies under
the extant legal and regulatory framework of the country, including Foreign
Exchange and Payment Systems laws and regulations.
Thereafter, in 2017, the Reserve Bank of India issued a press release dated
February 01, 2017.[Wherein it cautioned the people that it has not issued any
licence/authorisation to any entity/company operating any schemes or dealing
with Bitcoin or any cryptocurrency. As such, any user, holder, investor, trader,
etc. dealing with Virtual Currencies will be doing so at their own risk.
Subsequently, in the same year, another clarification was issued by the Reserve
Bank of India dated December 05, 2017. Wherein it in the wake of significant
spurt in the valuation of many Cryptocurrencies and rapid growth in Initial Coin
Offerings (ICOs), RBI reiterated the concerns.
On November 2, 2017, the Government of India, introduced a new bill namely the
Crypto-token Regulation Bill of 2018, However, the same could not be passed.
In the Year 2018. As per the powers conferred by section 35A read with section
36(1)(a) of Banking Regulation Act, 1949, section 35A read with section 36(1)(a)
and section 56 of the Banking Regulation Act, 1949, section 45JA and 45L of 2
the Reserve Bank of India Act, 1934 and Section 10(2) read with Section 18 of
Payment and Settlement Systems Act, 2007,
the Reserve Bank of India issued a notification dated April 6, 2018.
Wherein it issued instructions to various all Commercial and Co-operative Banks
/Payments Banks/Small Finance Banks / NBFCs / Payment System Providers regulated
by it to not deal in Cryptocurrencies or provide services for facilitating any
person or entity in dealing with or settling Cryptocurrencies.
included maintaining accounts, registering, trading, settling, clearing, giving
loans against virtual tokens, accepting them as collateral, opening accounts of
exchanges dealing with them and transfer/receipt of money in accounts relating
to purchase/ sale of Cryptocurrencies. The said instructions were to be in force
with immediate effect by the banking regulator from the date of instructions
issued. It also further instructed the regulated entities that already provide
such services to exit the relationship within three months from the date of the
This legally meant that any transaction with cryptocurrencies was deemed to be
In the year 2018, this circular went on to be challenged before the Hon�ble
Supreme Court of India.In the Internet and Mobile Association of India V.
Reserve Bank of India
The court issued a judgment wherein it struck down the ban on cryptocurrency by
the Reserve Bank Of India. This judgment was given on the 4th March 2020, from
the perspective of Article 19(1)(g) of the Constitution of India which provides
for the freedom to practice any profession or to carry on any occupation, trade
or business, and the doctrine of proportionality.
In the meantime the Government of India had come up again with fresh namely ]
Banning of Cryptocurrency and Regulation of Official Digital Currency Bill,
However, this time too the same was could not be passed as the bill drafts have
sharp contradictions with each other.
Lately, on 24th March 2021 the Ministry of Corporate Affairs, Government of
India issued a notification wherein it amended the provision of Schedule III of
the Companies Act 2013.
The provision provides for disclosure of information Where the Company has
traded or invested in Cryptocurrency or Virtual Currency during the financial
year, the following shall be disclosed:
- profit or loss on transactions involving Cryptocurrency or Virtual
- amount of currency held as at the reporting date,
- deposits or advances from any person for the purpose of trading or
investing in CryptoCurrency or virtual currency.
The provisions came into force with effect from the 1st day
of April 2021.
The direction ahead
The new regulation, The Cryptocurrency and Regulation of Official Digital
Currency Bill, 2021 was lately introduced in the parliament.
It aims to create a facilitative framework for the creation of the official
digital currency to be issued by the Reserve Bank of India. The Bill also seeks
to prohibit all private cryptocurrencies in India, however, it allows for
certain exceptions to promote the underlying technology of cryptocurrency and
its uses. The government has not set a defined timeline for the same. And the
said bill stands pending to be passed in Parliament.
In these times we are the midst of a technological revolution that is
fundamentally changing the way we communicate, access information, and conduct
business transactions. The regulating intuitions such as the Reserve Bank of
India is charged with promoting monetary and financial stability and the safety
and efficiency of the payment system.
Effective functioning of any economy requires that people have faith and
confidence not only in the currency, but also in the payment networks, banks,
and other payment service providers that allow money to flow daily
The governments around the world including India are carefully monitoring the
development in this area. In the past, they have adopted technological
innovations in the banking system from time to time.
In recent times the rise of distributed ledger technology has a range of
creation of new products and services�including cryptocurrencies.
The only concerns which remain are the volatile nature of the currency for the
regulators to address.
It can be foresighted that, the governments are keeping the window open to adopt
the new cryptocurrencies. At the same time reckoning the possibility to come up
with their own form of cryptocurrency which will provide for financial
stability, consumer protection, legal, and privacy.
- Press Release: 2013-2014/1261 -
- Press Release: 2016-17/2054 -
- Press Release: 2017-2018/1530 -
- RBI/2017-18/154 , DBR.No.BP.BC.104 /08.13.102/2017-18 -
- Internet and Mobile Association of India V. Reserve Bank of India, Writ
Petition (Civil) No.528 of 2018 Supreme Court Of India.
- The Companies Act, 2013amendments in Schedule III Ministry of Corporate
- Lok Sabha Bulletin No.1989-2025 - http://loksabhadocs.nic.in/bull2mk/2021/29012021.pdf
The content of this article is intended to provide a general guide to the
subject matter only. Specialist advice should be sought about your specific
Should you have any legal query you may contact us at Need Legal Assistance.
Written By: Harshad Rathod Advocate, HNR LEGAL
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