The Indian government has notified transactions involving the exchange, transfer and safekeeping of crypto assets under the Prevention of Money-laundering Act (PMLA). This move aims to aid investigative agencies in carrying out their actions against crypto companies. In this essay, we will delve deeper into the topic of cryptocurrencies in India and the need for regulations.
Understanding Cryptocurrencies
A cryptocurrency is a form of digital currency that uses cryptography to secure transactions and control the creation of new units. It is decentralised in nature, which means that no single entity owns or controls it. Cryptocurrencies work on the model of cryptography, where data is converted into codes to ensure anonymity and security.
Is Cryptocurrency Legal in India?
Cryptocurrencies as a payment medium in India are not regulated by any central authority. There are no rules and regulations or any guidelines laid down for settling disputes while dealing with cryptocurrency. Trading in cryptocurrency is done at investors’ risk. The Union Budget 2022 announced a 30% tax on gains from cryptocurrencies and a 1% tax deducted at source.
Issues with Cryptocurrencies in India
The anonymity of transacting parties, problems related to lack of proper authority, absence of well-defined laws, problems of tax evasion, money laundering, phishing attacks faced by users, loss of data and insecurity of trading and purchase platforms are some of the issues related to cryptocurrencies in India.
The Cryptocurrency Bill 2021
The Cryptocurrency Bill 2021, introduced in the Lok Sabha by the government, aims to regulate the cryptocurrency market in India. It seeks to create a favorable structure for the creation of the official digital currency that will be issued by the Reserve Bank Of India (RBI). The bill also prohibits all other private cryptocurrencies but, with certain exceptions to boost the underlying technology of cryptocurrency.
MCQs on Cryptocurrencies in India
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What is the purpose of the circular issued by the Finance Ministry regarding crypto assets?
A. To bring crypto asset transactions under the Prevention of Money Laundering Act
B. To regulate the trading of cryptocurrencies in India
C. To ban the use of all cryptocurrencies in India
D. To provide tax exemptions to individuals dealing with cryptocurrencies
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What is the Cryptocurrency Bill 2021?
A. A legislative initiative to regulate the market of cryptocurrencies in India
B. A bill to ban all private cryptocurrencies in India
C. A bill to provide tax exemptions to individuals dealing with cryptocurrencies
D. A bill to establish a central authority to regulate cryptocurrencies in India
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What are some issues associated with cryptocurrencies in India?
A. Anonymity of transacting parties, problems related to lack of proper authority, problems of tax evasion, money laundering, etc.
B. Issues related to fake news and misinformation, data privacy, and online security.
C. Issues related to the availability and affordability of internet services, inadequate infrastructure, and lack of digital literacy.
D. Issues related to poor financial inclusion, high levels of corruption, and lack of access to formal banking services.
