BlockchainCryptocurrencyTechnology Law / Cyber Law

The crypto regime in India

The Road Ahead for India

India, as a developing nation, cannot afford to not adopt new-age technology that is bound to benefit the financial system of the nation. Crypto-currencies are based on Blockchain technology, a distributed public ledger, which is considered one of the most secure platforms for financial transactions.

Nations around the globe are accepting blockchain technology to transform, India too came up with its National Strategy on Blockchain[14] in December 2019.

The vision[15] of the national strategy is to make India a leader in innovation, education, commercialization, and adoption of blockchain technology in the private and public sectors.

The current approach being employed by India is somewhat contradicting: on one hand the government has emphasized on using blockchain technology[16][17][18] in financial eco-system and on the other, the main regulator RBI had barred the institutions associated with it from assisting the crypto-traders and crypto-exchanges, and the government has also brought the draft proposal to ban crypto-currency.

Concluding, I can only say that while the watershed judgment by the Supreme Court is a welcome sign on the adoption of blockchain and crypto-assets in financial eco-system of India, it is now on the government to provide a suitable environment by bringing favourable policies and regulation to ensure that India does not lose on the opportunity that might boost her flailing financial health.


[1] Circular DBR.No.BP.BC.104 /08.13.102/2017-18 – RBI/2017-18/154, issued on April 6th, 2018, accessible at https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11243

[2] https://www.irs.gov/businesses/small-businesses-self-employed/virtual-currencies

[3] The property nature of crypto-currency is explained in para 15 of the report by United Kingdom Jurisdiction Taskforce titled “Legal statement on cryptoassets and smart contracts”, accessible at https://35z8e83m1ih83drye280o9d1-wpengine.netdna-ssl.com/wp-content/uploads/2019/11/6.6056_JO_Cryptocurrencies_Statement_FINAL_WEB_111119-1.pdf

[4] Internet and Mobile Association of India v. Reserve Bank of India, decided on March 4th, 2020, accessible at https://main.sci.gov.in/supremecourt/2018/19230/19230_2018_4_1501_21151_Judgement_04-Mar-2020.pdf

[5] para 112 of Budget Speech, February 2018 by Shri Arun Jaitley, accessible at https://www.indiabudget.gov.in/budget2018-2019/ub2018-19/bs/bs.pdf

[6] The report titled “Report of the Committee to propose specific actions to be taken in relation to Virtual Currencies” was submitted to the government on Feb 28th, 2019 and is accessible at https://dea.gov.in/sites/default/files/Approved%20and%20Signed%20Report%20and%20Bill%20of%20IMC%20on%20VCs%2028%20Feb%202019.pdf

[7] Ibid.

[8] “Comments | Banning of Cryptocurrency & Regulation of Official Digital Currency Bill, 2019” by Aayush Shankar, published on metacept, accessible at https://metacept.com/comments-banning-of-cryptocurrency-regulation-of-official-digital-currency-bill-2019/, last accessed March 5th, 2020.

[9] para 17 of the G20 Osaka Leaders’ Declaration reads “Technological innovations can deliver significant benefits to the financial system and the broader economy. While crypto-assets do not pose a threat to global financial stability at this point, we are closely monitoring developments and remain vigilant to existing and emerging risks. We welcome on-going work by the Financial Stability Board (FSB) and other standard setting bodies and ask them to advise on additional multilateral responses as needed. We reaffirm our commitment to applying the recently amended FATF Standards to virtual assets and related providers for anti-money laundering and countering the financing of terrorism. We welcome the adoption of the Financial Action Task Force (FATF) Interpretive Note and Guidance. We also welcome the FSB’s work on the possible implications of decentralized financial technologies and 5 how regulators can engage other stakeholders. We also continue to step up efforts to enhance cyber resilience.” full declaration accessible at https://www.consilium.europa.eu/media/40124/final_g20_osaka_leaders_declaration.pdf

[10] “G20 officially supports FATF’s crypto guidelines that require exchanges to share customer data” accessible at https://ca.finance.yahoo.com/news/g20-officially-supports-fatf-crypto-081134054.html, last accessed March 5th, 2020.

[11] “Hong Kong and Abu Dhabi Change Crypto Regulations to Align With FATF”, accessible at https://cointelegraph.com/news/hong-kong-and-abu-dhabi-change-crypto-regulations-to-align-with-fatf, last accessed March 5th, 2020.

[12] The report titled “GUIDANCE FOR A RISK-BASED APPROACH TO VIRTUAL ASSETS AND VIRTUAL ASSET SERVICE PROVIDERS” details out the FATF Framework for Regulation of Virtual Currencies and is accessible at http://www.fatf-gafi.org/media/fatf/documents/recommendations/RBA-VA-VASPs.pdf

[13] Consultation Paper titled the “Joint Canadian Securities Administrators/Investment Industry Regulatory Organization of Canada: Proposed Framework for Crypto-Asset Trading Platforms” (2019) by Ontario Securities Commission, accessible at https://www.osc.gov.on.ca/en/59589.htm, last accessed March 5th, 2020.

[14] Blockchain the National Strategy by NITI Aayog, accessible at https://niti.gov.in/sites/default/files/2020-01/Blockchain_The_India_Strategy_Part_I.pdf, last accessed March 5th, 2020.

[15] Vision Statement of the National Strategy on Blockchain reads “India will be one of the leading countries in the world in innovation, education, commercialization, and adoption of blockchain technology in private and public sectors by 2025.”

[16] Under 4.1 Blockchain in Financial Applications, page 25 of the National Strategy on Blockchain the government states that in India, ”organizations like Bajaj Electricals with the help of YES Bank, and Mahindra and Mahindra group, through its group company Mahindra Finance, are exploring trade financing through Blockchain technology” and concedes that ”For Blockchain to have a wider impact in the finance domain, it is important that a large number of parties transacting with each other come on board on a common Blockchain platform” indicating that the government might come up with a common platform to bring various parties dealing with blockchain-based financial assets on a single platform.

[17] under the header of Blockchain for Cyber currency and legal industry, page 43 of National Strategy on Blockchain, it reads “Ethereum smart contracts have great potential to increase efficiency in the legal industry. These self-enforcing contracts ensure that only once specific terms are met will the contract follow through with its instructions.” and “due to their immutable and autonomous nature, smart contracts provide an alluring alternative to traditional legal contracts” again conceding that smart contracts (which run on crypto-currency) have greater efficiency and are being preferred by the legal industry.

[18] Under Going Forward: Think Networks, Think Global, at page 75 of the National Strategy on Blockchain, it states that “There is a need to clearly differentiate between different types of blockchain systems, welcoming all such applications that fall in the ‘permissioned’ space and hence offer a total clarity on the administrators, validators and the people who conduct transactions by strictly following the laws of the land and the KYC/ AML aspects of verifying identities.” which are the elements of the FATF Regulatory Framework.

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Gyan Tripathi

Gyan is Editor, Information Technology for Metacept and has a keen interest in tech and the evolution of cyber policy and tech laws. Tweets @Gyan_Tripathi_

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