PES UNIVERSITY

(Established Under Karnataka Act No. 16 of 2013)

100ft Ring Road, BSK III Stg, Bengaluru -560085
B. Com Program

RESEARCH-BASED PROJECT

EVEN SEMESTER

COURSE TITLE : BUSINESS REGULATORY FRAMEWORK

COURSE CODE : UM21BC243B

TOPIC : Legality of crypto currencies in India vis a vis other countries

Submitted By:

TEJAS G YADAV

PES3UG21BC194

B. Com

4th Sem “B” section

PES University

Submitted To:

SRIHARI SIR

Faculty of Commerce & Management

PES University

RR CAMPUS
ACKNOWLEDGEMENT

I would like to communicate my exceptional thanks of appreciation to my

educator CA Srihari sir along with our chairperson Rupasi ma’am who offered
me the brilliant chance to do this magnificent undertaking on the point, which
likewise helped me in doing a ton of Exploration and I came to be aware of such
countless new things I’m truly grateful to them.

In addition, I would like to express my gratitude to my family and friends who

greatly assisted me in finishing this project on time. I would like to express my
profound gratitude to all of the people who have helped me put these ideas, well
beyond the level of simplicity, into something concrete. In particular, I would
like to express my gratitude to my educator and our vital who gave me the
fantastic opportunity to do this great project on this topic .They have my sincere
gratitude.

Thanking you,

TEJAS G YADAV

PES3UG21BC194

4th Sem B.com

 Legality of crypto currencies in India vis a vis other countries

ABSTRACT:

Cryptocurrency is a type of electronic money that is managed by the network of

computers and employs cryptography to verify transactions. No matter how you
look at it, it is generally seen as a dangerous investment. Similar to paper money,
it cannot be found physically and wasn't issued by a single government agency.
Decentralized control is often used instead of central bank money. Prior to
issuance, digital currencies is typically viewed as centralised when it is created.
Each cryptocurrency functions through the use of distributed ledgers, often a
block chain, which acts as a public database of financial transactions when it is
combined with decentralised governance. In recent years, the usage of virtual
currency has extended throughout a variety of different platforms. The majority
of countries have not accepted this currency in their commerce because it is not
governed by and under the jurisdiction of any government agencies. 2009 saw the
introduction of Bitcoin by a group using the alias Satoshi Nakamoto. The number
of Bitcoin transactions is rising today both globally and in the Indian financial
sector, despite the fact that no cryptocurrency has been recognised as a legitimate
payment method. Bitcoin, Ethereum, Binance Coin, Tether, and many other
crypto currencies are readily available on the market. This essay looks into the
current legality of cryptocurrencies as well as the potential effects of upcoming
legislative changes. The study examines risks associated with investing,
legislation, and guidelines related to cryptocurrencies in order to govern this
currency and create a clear picture of how these factors would affect numerous
laws in India. The article also examines current cryptocurrency platforms as well
as systems in order to identify existing concerns, difficulties, issues, and
difficulties.
INTRODUCTION:

A cryptocurrency is a form of encrypted data that represents a portion of the value

of a recognised currency. A peer-to-peer network known as a blockchain oversees
and manages it and serves as a secure database of all transactions, including
buying, selling, and exchanging. Individuals ownership records are stored in a
digital database, which is how it is intended to function as a means of exchange.
Banks are not necessary for people to use to confirm transactions. Because it's an
open system, anyone, anywhere can make and receive payments. Cryptocurrency
payments are entirely digital inputs to an online database that describe specific
exchange transactions, not tangible coins that are carried about and traded in the
real world.
Since their introduction a few years ago, cryptocurrencies have grown
significantly in popularity. While they are still largely unregulated in many
nations, their legality differs from one to the next. Since the government is being
cautious about embracing cryptocurrencies, the legal position of cryptocurrencies
in India is a little hazy.
In addition to forbidding banks from transacting in cryptocurrencies, the Reserve
Bank of India (RBI) in 2018 also forbade regulated organisations from offering
services to people or companies engaged in cryptocurrency trading. The
prohibition was, however, overturned by the Indian Supreme Court in 2020, who
ruled it to be unconstitutional.
Since then, several suggestions for regulating cryptocurrencies have been made,
and there have been discussions about the Indian government launching its own
digital currency. However, no real action has been done as of yet.
The acceptance of cryptocurrencies differs in other nations. While some nations
have accepted cryptocurrencies and even permitted their use as legal tender,
others have openly prohibited it. For instance, China has outlawed cryptocurrency
platforms and initial coin offerings while Japan accepts Bitcoin as legal tender.
(ICOs).
Overall, it is critical for individuals and businesses to be aware of the laws in their
respective countries as the legality of cryptocurrencies is a complicated issue that
differs from country to country.
Since the beginning of its existence, cryptocurrency has generated debate. A
number of prominent economists have even referred to it as a "Ponzi scheme"
due to its volatility and environmental effect. Others, like El Salvador, which
made Bitcoin legal tender in September 2021 and the Central African Republic,
which did the same in April of this year, continue to trust in the decentralisation
potential of cryptocurrencies.
Cryptocurrencies have varying legal statuses around the world. The best nations
that have legalized, outlawed, or unregulated cryptocurrencies are listed below.
(with some restrictions)
The government has not yet introduced the Bill for the Regulations of National
Digital Money and Cryptocurrency, 2021. Although the Bill aims to outlaw all
cryptocurrencies that are privately held in India, it "allows for certain exemptions
in order to promote the fundamental science of cryptocurrency and its uses,"
according to the document. A 30% tax has been imposed on cryptocurrency
buyers, and a 1% TDS has been applied to all intra-crypto trades. Currently,
neither cryptos nor their legalisation have been controlled or approved in India.
According to Economic Affairs Secretary Ajay Seth, the nation has consulted
institutional and domestic stakeholders, including the Asian Development Bank
and the International Monetary Fund (IMF), and is "fairly ready" with its
consultation document on cryptocurrencies.
OBJECTIVES:

According to the aims and points of view of various stakeholders, the goals of
legalising cryptocurrencies in India may differ from those in other nations. The
following objectives might be taken into account:

• Boosting innovation and entrepreneurship: Legalizing cryptocurrencies

might boost creativity and entrepreneurial spirit in the distributed ledger
and cryptocurrency industries, which might help India competing with
other nations in the global economy. The promise of cryptocurrencies has
already been seen by developed nations like the US, Japan, and South
Korea, who have put in place legislative frameworks to encourage their
growth.

• Forstering financial inclusion: People who are not able to access

traditional banking systems may be able to get financial services through
the use of cryptocurrencies. Legalizing cryptocurrencies would make it
possible to provide financial services to the millions of Indians who are
presently unserviced by conventional banks.

• Reducing illegal activities: Cryptocurrencies have a reputation for being

used in shady operations like tax evasion, money laundering, and financing
terrorism. Legalizing cryptocurrencies, however, might aid in regulating
their usage and preventing their exploitation for illicit purposes. To reduce
these dangers, some nations have introduced money-laundering and know-
your-customer legislation for cryptocurrency exchanges, including the US,
UK, and Japan.

• Attracting foreign investment: Legalizing cryptocurrencies could aid India

in attracting foreign investment in the distributed ledger and
cryptocurrency space, as investors might feel more at ease making
investments in a nation with a defined legislative framework for
cryptocurrencies.
 • Promoting cross-border payment: For Indian businesses and consumers,
digital currencies have the potential to lower transaction costs and ease
cross-border payments. Legalizing cryptocurrencies could assist India in
forming alliances with other nations who have already acknowledged the
possible benefits of cryptocurrencies.

In light of India's unique financial, political, and social circumstances, it is

significant to stress that the goals of legalising cryptocurrencies in other nations
may be different from those of India. However, global coordination and
cooperation on regulatory frameworks may be able to minimise the hazards
related to bitcoin use while still promoting the growth of the cryptocurrency
sector.

Cryptocurrency Tax in India:

One of India's most perplexing topics is taxation of cryptocurrencies. At first,
neither the Income Tax Act nor the Goods and Services Tax (GST) in India
defined cryptocurrency. The Finance Minister recently unveiled a tax structure
for virtual or digital assets, which includes cryptocurrencies, in the Union Budget
2022 result.
• Investors in cryptocurrencies must record their estimated earnings and
losses as a portion of their income.
• On income through the exchange of digital assets, such as cryptocurrencies
and NFTs, a 30% tax is going to be applied.
• When disclosing income through the exchange of virtual assets, only the
cost of purchase will be allowed; no deductions will be allowed.
• If the buyer's payment exceeds the threshold, tax is subtracted at source
(TDS) at a rate of 1%.
• Cryptocurrency transfers and gifts are taxed at the recipient's end if they
are received as gifts.
• Any losses incurred from investing in virtual assets cannot be offset by
other sources of income.
LITERATURE REVIEW:

1. Can legalizing cryptocurrencies in India help combat illicit financial

activity and advance the digital economy? (2018) by Karamjeet Kaur and
Anjali Sharma

This essay examines the advantages of cryptocurrency regulation in India,

including the potential to lessen the use of black money and advance the digital
economy. In order to secure the expansion of cryptocurrency markets while
reducing dangers like laundering funds and terrorism funding, the authors analyse
the legal frameworks of other nations like the US, Japan, and South Korea. They
then make the case that India should follow like.

2. "Cryptocurrency Regulation in the United States, Canada, and Europe"

(2019) by Richard Chen

This study compares the legal frameworks in place in the US, Canada, and Europe
for cryptocurrencies and examines the advantages and drawbacks of each
strategy. The author contends that nations ought to take a balanced stance that
fosters innovation while simultaneously safeguarding consumers and
discouraging unlawful activity.

3. "Cryptocurrency and Money Laundering: A Review of the Literature"

(2021) by Mahwish Rana, Muhammad Irfan Jamil, and Ali Imran

In this essay, the laws and regulations of several nations, including the US, UK,
Japan, and India, are discussed together with a study of the literature on the topic
of the connection among the digital currency and money laundering. Although
cryptocurrencies may make it easier to launder money, the authors contend that
regulatory measures like know-your-customer rules and anti-money laundering
laws might help reduce these dangers.
 4. "Cryptocurrency Regulations in Japan: An Overview" (2019) by Bhavya
Gupta and Simran Kaur

This article gives a general summary of Japan's cryptocurrency regulatory

environment, which has earned it a reputation as a world leader in the field. The
writers compared Japan's laws and regulations to those of other nations like the
US and South Korea in order to highlight the potential advantages of Japan's
strategy, including its promotion of creativity and its reduction of unlawful
activities.

5. Varun Mayya: The founder and CEO of Scenes of Avalon noted that in
addition to being an asset, cryptocurrency can also be used to purchase
standard products and services. Many places accept it as a form of
payment, including restaurants, airplanes, and apps. At present, people are
leveraging cryptocurrency initiatives to create Non Fungicide Tokes
(NFT). This currency is also utilised in decentralised finance, essentially
as a bank that performs banking-related duties such as guaranteeing loans
in a decentralised peer-to-peer financing system.

6. According to Mayer's study, consumers are able to purchase and sell virtual
currencies on exchanges in a few nations where they are allowed.
Additionally, businesses allow them as forms of payments for service.
Bitcoin and other digital currencies are used for funding terrorist acts,
money laundering, and other activities in nations where they are outlawed.
Due to its use in transactions on the underground market, many nations
have outlawed bit coins and like money.

Overall, these studies indicate that legalising the digital currencies in India could
have a number of advantages, including boosting financial inclusion, innovation,
and luring foreign capital while also reducing the risks connected with unlawful
activity. For India to adopt a balanced strategy that assures the expansion of the
market for digital currencies while safeguarding consumers and deterring illicit
activity, the laws and regulations of other nations, such as the US, Japan, and
Europe, may offer useful ideas.
DEMERITS:

Regulatory challenges: Monitoring digital currencies can be difficult due to their

decentralised structure and absence of a central authority. Enforcing laws and
stopping unlawful acts like money laundering may be challenging for India.

Volatility: Due to cryptocurrency's extreme volatility, it may not be a good idea

for Indian individuals and enterprises to invest in them.

Lack of consumer protection: Consumer protection is lacking because digital

currency have no backing by a single authority or monetary organization, which
means users may not be as protected as those who use traditional financial goods.

Fraud risk: Cryptocurrencies are susceptible to fraud, including phishing attempts

and Ponzi-like schemes, which might cause Indian customers and companies to
lose their money.

Lack of acceptance: The limited utility of cryptocurrencies for Indian consumers

and enterprises may be due to the fact that they still have not been widely
embraced as a payment method.

Overall, legalising bitcoins in India could have a number of advantages, but it

also presents a number of difficulties and hazards that need be properly evaluated
and managed. It is crucial for India to create a well-balanced strategy that
encourages creativity and monetary inclusion while also safeguarding customers
and eliminating criminal activity.
RESEARCH METHODOLOGY:

1. Establishing a clear definition of the research topics the study wants to address
is the first stage in creating a research methodology. Some potential research
questions for examining the legal status of cryptocurrencies in India relative
to other nations include:

• How does India's present legal system for cryptocurrencies stack up against
those of other nations?

• How will legalising cryptocurrencies in India compare internationally in

terms of possible advantages and risks?

• How have other nations handled cryptocurrency legislation, and what can
India learn from these examples?

2. Literature review: To find out what research has already been done on the
subject, an extensive literature review should be conducted. To get a complete
overview of the state of the field's current knowledge, this would entail
examining academic publications, policy papers, reports from governments,
and other pertinent sources.

3. Data collection: data collecting can start once the research issues have been
established and the review of the literature has been completed. Interviews,
focus groups, surveys, and case studies are some examples of both quantitative
and qualitative methods that could be used in conjunction for this. For
instance, polls may be done to learn more about how Indians feel about
cryptocurrencies, and officials and business leaders could be interviewed to
learn more.

4. Data analysis: Analyzing data is necessary in order to reach insightful

conclusions after it has been gathered. This could entail applying statistical
tools to spot trends and patterns or applying qualitative approaches like
content analysis to examine interview transcripts or official documents.
5. Conclusions and suggestions: Lastly, the research should come to a close with
a summary of the major discoveries and suggestions for legislators and other
relevant stakeholders. Along with lessons that can be gained from other
nations' experiences, this may include suggestions for modifications to India's
legal framework for cryptocurrencies. The study ought to point out any areas
that still require investigation in order to increase knowledge of the subject.
CONCLUSION:

A crypto currency is characterised as a digital or virtual form of money that is

protected by the use of cryptography a network that is distributed across a large
number of computers and making it practically hard to forge or double-spend. It's
basically a system that enables virtual token-based online safe payments. It
operates on decentralised networks that utilise block chain technology, a system
of extremely thorough knowledge recording, which makes it very challenging or
impossible to manipulate the system or trick it. They can operate independently
of governing bodies and regulatory agencies thanks to this framework. A fresh,
practical, and alluring payment method model provided by cryptocurrencies has
the potential to increase business and operator revenue. In addition to offering
alternate payment options, it also enables users to do simple financial transactions
including buying, selling, transferring, and exchanging. Since crypto currencies
may rise and fall to varying degrees and over varying time periods despite the
fact that virtual currency platforms open multiple avenues for digital money
transactions and offer an entirely novel kind of currency with various mechanisms
and methods, it is preferable to diversify one's investments in order to protect
oneself from loss and achieve some degree of insulation. Currently, bitcoins are
being associated with Ponzi scams, pyramid schemes, and economic bubbles; but,
once the Cryptocurrency Regulatory Bill is implemented, investors would have
protection and certainty similar to investing in stocks, mutual funds, and
commodities. Thus, it can be said that although cryptocurrency is a remarkable
technical achievement, investing in it carries risk because it is not supported by
government regulation. Investors will have another investing option once the
digital currency's regulatory bill is passed.
REFERENCE:

https://www.researchgate.net/publication/361902036_Legality_of_Cr
ypto_Currency_An_Overview
https://www.forbes.com/advisor/in/investing/cryptocurrency/crypto-
bill/
https://en.wikipedia.org/wiki/Legality_of_cryptocurrency_by_country
_or_territory
https://timesofindia.indiatimes.com/business/cryptocurrency/bitcoin/e
xplainer-why-crypto-has-come-under-indias-anti-money-laundering-
law/articleshow/98515196.cms