In his budget speech in February 2018, Arun Jaitley stated that India does not recognise cryptocurrency as legal tender. Instead, they will encourage blockchain technology in payment systems. On April 5th, 2018, the RBI had directed all banks to wind up any associations they had with virtual currency.
The ban officially kicked in on July 6th. Though cryptocurrency is a burgeoning field, with Indians making one in every ten bitcoin transactions, the Indian government does not accept it as legitimate. The RBI has been warning against it since 2013.
Let’s talk about why India has adopted such a stubborn attitude towards cryptocurrency.
Is cryptocurrency illegal in India?
First and foremost, we must distinguish between legality and legal tender. Cryptocurrency can be freely owned — bought and sold by an Indian citizen. Unlike illegal substances like drugs, those found to have cryptocurrency will not be prosecuted. Hence, it is not illegal.
However, virtual currency is not legal tender. A Legal tender is an official medium of payment that sellers must necessarily accept in exchange for goods or services. No citizen can turn down a payment made in fiat currency notes.
On the other hand, a person can choose to either accept or turn down a payment made in cryptocurrency. If they refuse to accept payment in terms of bitcoin, the government cannot interfere as it does not consider cryptocurrency a legitimate medium of exchange.
The ban on sale or purchase of cryptocurrencies was imposed on banks and other RBI-regulated bodies alone.
Causes of the ban
Though the government has not been particularly forthcoming in regards to their cryptocurrency policies, we can formulate some theories based on what we know.
Cryptocurrency is still a relatively new technology. Its limits and potential have not been fully explored yet. Moreover, it is more volatile and subject to value change than fiat currencies.
Also, the system is entirely decentralised and unregulated. Cryptocurrency relies on a form of network democracy that no government can hope to control effectively. Such a system goes against well-established ones that we have followed for centuries.
Though hacks are far and few in between, cybersecurity may still be a concern to government officials. Third-parties involved in the dealing of online currency may not be as secure as the network itself. Furthermore, private transactions also make it easier for people to skirt the law.
Cryptocurrency mining requires an extraordinary amount of resources. Not all Indian citizens have access to this kind of computing power. As a result, there could be the formation of new social divisions between the haves and have-nots.
All in all, cryptocurrency seems to have been rejected mostly because it is a novel idea that needs time to become normalised before it can be adopted in everyday life.
Where else is cryptocurrency illegal?
There is an absolute ban on cryptocurrencies in the following nations.
The following nations do not accept cryptocurrency as legal tender but have not made it illegal either.
Akshaya is an aspiring cardiac surgeon who writes both content and creative pieces at any given juncture. As a powerful orator, a voracious reader, and a bit of a know-it-all, she is usually found with a book in hand. A self-labelled fangirl, Akshaya considers herself a connoisseur of all things nerdy.
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