CA Harshal. M. Mehta
Yes, we all agree that change is an inevitable part of life but the block chain technology is the disruptive change which shall be witnessed by almost every sector. One of the examples of block chain technology is crypto-currencies. Please do understand that there is a difference between crypto-currencies being banned in India and crypto-currencies not being used as a legal tender in India. When people realize the difference between the two of them then they shall stop promulgating vague facts about the legality of crypto-currencies.
To further elaborate even gold is not a legal tender in India. So should we consider gold as illegal in India? Gold can be exchanged as per understanding between two parties, but it is not considered as a legal tender in India. Legal tender is only coins and currency as defined by the RBI, so gold, stocks and bonds are not legal tender. But the fact that they are not legal tender makes no comment on whether they themselves are legal or illegal. Various countries are taking a positive view over the usage of crypto-currencies and it is pertinent to note that Japan is one of them. Japan has been ahead from all other countries in acknowledging this disruption by way of legalizing the usage of bitcoin. It has given an open support to all the corporations harnessing the new age technology and has amended its tax laws in order to get the gains in the tax net.
Reserve banks around the globe have responsibility towards safeguarding the financial interests of their citizens from the treacherous act by the so called self-proclaimed crypto asset experts. Similarly RBI had also issued various circulars time and again for safeguarding people from the frauds being undertaken in the name of crypto assets. But the recent circular stating the withdrawal of banking support to virtual currency exchanges has drawn a worldwide attention about what would be the RBI’s stand on bitcoins and other altcoins. As widely known that the head of the International Monetary Fund, Christine Lagarde, has been stating the global benefits of crypto currencies and asking other countries to enhance this technology in a way to upgrade this revolution in the finance sector. It is pertinent to note that will India pave out its own path or shall take a U-turn and follow other countries.
Despite various notifications by the RBI, the investors are recalcitrant in order to join this crypto-currency band wagon. The RBI shall have to re-think over its stand on various fronts, a few relevant of which have been mentioned here :
> Offer by Venezuela :
It has been reported that the government of Venezuela has offered the Indian government a fantastic deal: a 30 percent discount on crude oil imports. The only condition being that the oil must be purchased through the nation’s newly minted cryptocurrency, the Petro. India shouldn’t miss this mouth-watering deal as it could end up saving few billions of dollars.
In 2017, 8 percent of India’s total petroleum imports came from Venezuela at a cumulative cost of $5.5 billion. In this case, if the deal is agreed upon by India then it could end up saving $1.6 billion (approx.). This could put an end to the price related woes faced by the government and could end up in release of substantial funds for investing in other schemes.
> Tax perspective :
Currently, there is no express explanation by the government of India on taxation of bitcoins and other altcoins. However, it shall still be taxable either as short term or long term capital gains under the head ‘Capital gains’ as crypto currency shall be considered as an asset. If the crypto currencies are mined then it shall be taxed under the head ‘Profit from Business and Profession’. If the government comes up with a specific tax rate like tax on carbon credits then it is pertinent to note that this could be a potential revenue generator for the government.
> Judicial order :
A group of eleven individuals have filed a writ petition in the Supreme Court challenging the Reserve Bank of India decision to block “essential services” like banking for cryptocurrency related businesses in India. The judicial authority has asked the RBI to validate their move by substantial facts. If the court accepts public’s plea then the circulars shall have to be withdrawn and thereby making the government to rethink over its decision on crypto currencies.
> Disruption in banking services :
It is important to note that few crypto currencies are backed by good technologies like the altcoin ‘Ripple’. It has been specially developed in order to boost the financial services. The time taken by the current banking system in order to provide cross border payment services is way more then the one taken by XRP technology (ripple driven technology). Hence if cryto currencies like ripple are used then it could revolutionize the finance sector.
Like every coin, even crypto currency has flip sides but if the benefits of public interest outreach for a simpler future life then such technology is worth harnessing for the masses.