Union Budget 2018-2019
The former Finance Minister of India, Arun Jaitley had clearly specified in the Union Budget 2018-2019 speech that the distributed ledger system, also known as blockchain technology, allows any sequence of data or transactions to be organized without the use of middlemen. The government does not consider cryptocurrencies to be legal cash or coins and will take all necessary steps to prevent them from being used to finance illegal activities or as part of the payment system. The speech also included that the government will investigate the usage of blockchain technology in advance of the digital economy’s arrival.
The Reserve Bank of India on 5th April 2018 had issued a circular (Ring-fencing circular) titled, ‘Statement on Development and Regulatory Policies’ directing regulated entities (for example banks, non-banking financial companies, etc) to put a stop to dealings of virtual currencies. The circular stated that although technological advancements, especially those underpinning virtual currencies, have the potential to improve the financial system’s efficiency and inclusivity, these currencies, sometimes known as cryptocurrencies or crypto assets, raise issues about consumer protection, market integrity, and money laundering. The Reserve Bank has regularly warned users, holders, and dealers of virtual currencies, including Bitcoins, of the dangers of doing business with them. Because of the dangers, it has been determined that entities regulated by RBI would not engage with or offer services to any individual or corporate entity dealing with or settling VCs, with an immediate effect. Regulated entities that currently supply such services must terminate the agreement within a certain amount of time. This circular was challenged before the Supreme Court of India wherein the Court delivered its judgment on 4th March 2020, setting aside the aforementioned circular of RBI.