Cryptocurrency, Bitcoin: Bitcoin and cryptocurrency are in the news again after Congress' Maharashtra unit chief Nana Patole and Nationalist Congress Party (Sharad Pawar) leader Supriya Sule were accused of being involved in "illegal bitcoin activities" for the election campaign. Many questions are being raised about cryptocurrency and Bitcoin as to what they are and what the law says about their use.

Cryptocurrency is a digital or virtual currency.

Cryptocurrency is a digital or virtual currency that is secured by cryptography (code). They are almost impossible to counterfeit or duplicate. They exist on a decentralized network using blockchain technology. Blockchain is the technology that governs currencies like Bitcoin.

What does the law say about cryptocurrency and Bitcoin?

Bitcoin is the name of the most popular cryptocurrency, for which blockchain technology was created. Cryptocurrency has no physical existence. Its supply is determined by the protocol, not by the central bank. Talking about its legal aspect, India is preparing a framework for cryptocurrency. However, it cannot be called illegal until it is implemented. The government had announced to impose tax at the rate of 30 percent on the profit from cryptocurrency in 2022. However, despite imposing a tax on income from cryptocurrency, cryptocurrency cannot be considered mandatory and clearly legal.

What does RBI say?

The Reserve Bank of India (RBI) is also skeptical about the use of private crypto assets and considers it a major threat to the country's macroeconomic and financial stability. Finance Minister Nirmala Sitharaman has repeatedly said that cryptocurrencies issued by private entities cannot be "currency". Only if the Reserve Bank of India issues a digital currency will it be a currency. Sitharaman had said in July last year that any effective regulation or ban on cryptocurrencies would require "international cooperation".

Earlier, the Reserve Bank of India had proposed a ban which was rejected by the court order. RBI considers cryptocurrency a huge risk to financial stability and monetary stability. It is worth noting that on March 4, 2021, the Supreme Court had canceled the RBI's April 6, 2018 circular, which prohibited banks and entities regulated by it from providing services in relation to virtual currencies.

RBI Governor Shaktikanta Das said last month that virtual assets could create a situation where the central bank could lose control over the money supply in the economy. Currently, an inter-ministerial group (IMG) comprising officials from the RBI, the Securities and Exchange Board of India (SEBI), and the Finance Ministry is considering a comprehensive policy for cryptocurrencies. The IMG is yet to release a discussion paper on this, which will allow stakeholders to express their views before deciding on India's policy stance on cryptocurrencies.