Introduction
Virtual Currency (VC) represents an unregulated digital currency existing solely in electronic form. As defined by the Financial Action Task Force (FATF), VCs are digital assets that function as a medium of exchange, store of value, or unit of account—despite lacking legal tender status.
Key characteristics of cryptocurrencies (a subset of VCs):
- Decentralized transactions via public/private keys.
- Immutable public ledger recording all transactions.
- No central authority; value driven by market demand.
👉 Explore how cryptocurrencies work globally
How Cryptocurrency Works
- Exchanges: Users buy/sell cryptocurrencies (e.g., Bitcoin) for fiat currencies.
- Digital Wallets: Store assets securely for transactions.
- Mining: Miners verify transactions, earning new coins as rewards.
Landmark Case: Internet and Mobile Association of India v. Reserve Bank of India (2020)
- RBI’s 2018 Circular: Banned banks from servicing crypto exchanges.
- Supreme Court Ruling: Overturned the ban as "disproportionate," affirming crypto’s legality but advocating regulation.
Legal and Regulatory Landscape
Key Issues Addressed by the Supreme Court
- RBI’s Authority: Can regulate VCs affecting India’s financial system.
- VCs as Money: Not legal tender but tradable commodities.
- Proportionality Test: Blanket bans violate Article 19(1)(g) (right to trade).
Suggestions for Future Regulation
- RBI Oversight: Clear guidelines for crypto exchanges.
- Tax Framework: Clarify capital gains on VCs.
- Sovereign Cryptocurrency: Potential model akin to China’s DCEP.
👉 Learn about global crypto regulations
FAQs
Q1: Is Bitcoin legal in India?
A: Yes, but unregulated. The Supreme Court lifted RBI’s ban in 2020.
Q2: Can I pay taxes with cryptocurrency?
A: No—VCs aren’t legal tender. Taxable as assets.
Q3: What risks does crypto pose?
A: Money laundering, volatility, and lack of investor protection.
Conclusion
India’s crypto industry remains in flux. While the 2020 Supreme Court verdict provided temporary relief, comprehensive legislation is needed to balance innovation with risk mitigation. Stakeholders advocate for:
- Regulatory clarity.
- Consumer safeguards.
- Integration with traditional finance.
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