Finance minister Arun Jaitley’s statement that cryptocurrency is not a legal tender has elicited different interpretations across the industry. While some claim that the use of cryptocurrency itself is illegal, there is another faction in the industry that believes that the trading of cryptocurrency at exchanges has not been banned.
Cryptocurrency is digital currency where encryption techniques are used to oversee the generation of currency and verify the transfer of funds in a decentralized manner.
What Jaitley actually said was that “the government does not consider cryptocurrency legal tender or coin and will take all measures to eliminate the use of these crypto assets in financing illegitimate activities or as part of the payment system.”
Jaitley also added that the government is not against blockchain technology. “The government will explore the use of blockchain technology proactively for ushering in the digital economy,” he had said, in the budget speech.
This essentially means that just like gold, cryptocurrency will not be a part of the official payment system. However, it can be traded across exchanges.
Meanwhile, the government is considering a framework to regulate cryptocurrency by the end of this financial year, given that the virtual currency can be used for money laundering and terrorist funding.
In December, the government had constituted a committee to study the impact of cryptocurrencies and to make recommendations to regulate them.
Because of government’s concerns, cryptocurrency users have also been under the Income Tax scanner. Last month, the I-T department had sent notices to those transacting in cryptocurrency.
After India clampdown, Bitcoin declined by 8.7% on Thursday (budget day) to $9,100, the lowest since November 2017. Bitcoin slumped to its low for the year after seeing more than $44 billion in market value lost during January due to questions on global regulation and viability.
Even Facebook on 31 January announced that it was banning all ads related to cryptocurrencies in an effort to fight scams. Facebook, in its ad policy, said that it is barring ads for “financial products and services that are frequently associated with misleading or deceptive promotional practices, such as binary options, initial coin offerings, and cryptocurrency”.