While the relationship between cryptocurrencies and the government is uncomfortable, the asset class offers advantages that can benefit India
The use of virtual currency in the recent years has become prominent across the globe, including in India. Cryptocurrency is basically a digital/virtual currency that can be used as a medium of exchange. Cryptography provides it strong security and it is almost impossible to counterfeit or double-spend with cryptocurrency.
In India, crypto’s journey is considered to have started around 2013. While it did not have support from the Reserve Bank of India (RBI) — the central bank had given a clear cut warning that, “virtual currencies are not a legal tender in India” — in April 2018, the finance ministry appointed a committee to draft a Bill regarding cryptocurrencies. The ministry stated that is “was not in the favour of a ban”. In 2019, a draft Bill was issued under which holding, mining, selling, issuing, transferring or use of cryptocurrency was made punishable with a fine or imprisonment of up to 10 years, or both. However, in March 2020, the Supreme Court removed the ban on cryptocurrencies. In 2021, Finance Minister Nirmala Sitharaman stated in Rajya Sabha that the government has not taken any concrete step towards banning cryptocurrencies advertisements in India but through RBI and Sebi (Securities and Exchange Board of India), it will spread awareness about cryptocurrencies. In the Union Budget 2022–23, the government categorically mentioned that the transfer of any virtual currency/cryptocurrency asset will be liable to 30 per cent tax. Many investors welcomed the announcement as, according to them, the declaration in itself was the first step in recognising cryptocurrencies as a legitimate asset.