"To begin, defining anything is necessary before enacting a law, but defining cryptocurrencies is more complicated. Under the pseudonym Satoshi Nakamoto, cryptocurrency was established in 2009 by a programmer or potentially a group of programmers. Bitcoin ushered in a new era of decentralized digital currency and blockchain technology. The issue now is: what is a cryptocurrency? Is it money or commodity that you can purchase and sell, or is it an asset that you can invest in with the expectation that the value of your investment will increase in the future and you will make a nice return, similar to a property investment? This might be why many nations' authorities refer to crypto assets as such.
Regulation is required.
There are more than 100 million cryptocurrency investors in India, much more than in any other nation. With 27 million investors, the United States is in second place, followed by Nigeria with 13 million. It is self-evident that if our government makes a comment on cryptocurrency, individuals would undoubtedly have heart palpitations. It was claimed a few days ago that crypto might be outright outlawed in India; however, our finance minister subsequently said that photographs of an earlier crypto bill were being disseminated on various social media sites and that a new bill is still in the works. However, India's finance minister said that cryptocurrency would not be permitted to be used as money. When the finance minister said that cryptocurrencies and new laws of the Official Digital Currency Bill 2021 are under discussion by the cabinet for finalization, it was evident that the government would attempt to control it.
According to the authorities, cryptocurrencies like Bitcoin are used for money laundering, sponsoring criminal operations, and tax avoidance. Decentralisation is the fundamental concept or basis of cryptocurrencies. Today, every government supervises its country's monetary system via its central banks; however, Bitcoin and cryptocurrencies are so decentralised that they are uncontrolled by the authorities, which is why the government is opposed to relinquishing control.
On 3 May 2021, the biggest oil pipeline system in the United States was the victim of a ransomware assault by hackers. ""Colonial Pipeline"" was the name given to it. They took down the whole pipeline for a few days and demanded Bitcoins as ransom, believing that Bitcoins are anonymous and untraceable, therefore they expected to receive the amount and go without a fuss. Unfortunately, they were tracked down within a few weeks, and the US was able to collect 2.3 million dollars in Bitcoin paid in the ""Colonial Pipeline"" ransom. For the first time, it was shown that crypto and Bitcoin are no longer anonymous to nations like the United States, who have the technical means to trace them down. The same cannot be true for other countries across the globe, especially when it comes to money laundering, the Enforcement Directorate of India said that Rs 40 billion was laundered outside India using cryptocurrency in the previous year. Hacker-assisted money laundering and terror funding are legitimate issues. These are offered as justifications for government regulation.
Bitcoin and other cryptocurrencies are not legal tender in most countries, which means they cannot be used like cash but may be used for other reasons. Buying, selling, and using them as assets are all lawful. Bitcoin, for example, is legal in the United States and is taxed as property. Even banks are allowed to purchase and trade cryptocurrencies in certain countries, such as Germany. Cryptocurrency is not subject to any VAT or GST in the European Union. Cryptocurrencies are recognized as property in Australia, and profits earned from them may be subject to Capital Gains Tax. It is permissible to trade in cryptocurrencies and to keep them after purchasing them, but it is not lawful to use them as a means of payment. Cryptocurrencies are widely recognised as digital assets and commodities.
China began enacting crypto transaction limitations in 2013, when the People's Bank of China lifted the prohibition on approving and even engaging in Bitcoin transactions. Payment gateways that accept cryptocurrency were outlawed four years later. However, 2022 seems to be the most restrictive year for crypto in China, which prohibited crypto mining in June 2021 and finally put the whole crypto ecosystem to a total ban, prohibiting all activities both inside and beyond Chinese borders. Experts say that since China is a dictatorship, it wants complete control over everything and cannot abide the decentralisation architecture of cryptocurrencies. El Salvador, on the other hand, is the first nation to adopt Bitcoin alongside the US Dollar as legal cash. El Salvador, on the other hand, is the first nation to adopt Bitcoin alongside the US Dollar as legal cash.
The RBI originally prohibited cryptocurrencies in April 2018, however the restriction was challenged in court, and the Supreme Court overturned the ban in March 2020 in a historic decision. The court found that the restriction jeopardizes bitcoin exchanges' commercial potential, and that outlawing everything isn't the answer. They acknowledged the drawbacks of cryptocurrencies, stating that they have the potential to be misused, but that this does not necessitate a prohibition and that good rules should be drafted instead.
Following El Salvador would, in my view, be rather extreme since it may result in an unanticipated risk, but the moves made by Europe or the United States are pretty sensible. Furthermore, the disadvantages of cryptocurrencies may be avoided by using procedures such as Know Your Customer. KYC validates an investor's identity and address via the submission of required papers such as picture identification and proof of residence, as well as in-person verification (IPV). The Prevention of Money Laundering Act, 2002, and the Rules enacted thereunder, as well as the SEBI Master Circular on Anti Money Laundering Standards/ Combating the Financing of Terrorism/ Obligation of Securities Market Intermediaries, make KYC compliance required.
Naturally, the potential for crypto innovation will grow in the future, as will the security of digital coin transactions."