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Exploring the conundrums of Bitcoin and its legality within the Indian Legal system



The global economy is inexorably transforming into digital environment.  From investment, all is going paper based, to transfer of money. Cryptocurrency is the current and most innovative contribution to the world of digital payment. Bitcoin, a well-recognized cryptocurrency, has been gaining popularity across the globe.  Bitcoin is a world’s first decentralized digital currency that can be purchase, vend and exchange, with no role of an intermediary or middlemen such as bank. All the electronic transaction, prior to the evaluation of bitcoin in 2008, involved the role of an intermediary. Satoshi Nakamoto, Bitcoin’s founder, initially recognized the need for an electronic system of payment based on cryptographic proof rather than trust.

The introduction of Bitcoin is quite revolutionary since it has eliminated the issue of double spending without involving any central authority[i]. When it comes to digital currency, there is a high possibility that it can be spent twice. The holder can easily produce a copy of digital coin and, consign it to some other person while maintaining the original one. Every transaction pertaining to the Bitcoin is recorded in a publicly shared ledger which is known as blockchain. To ensure that the same Bitcoins haven’t been used before, new transactions are compared to the blockchain[ii]. Cryptocurrencies, to authenticate the transaction and avert double-spending problem, use public-key cryptography. Public-key cryptography includes a public key as well as private key. The cryptocurrency account’s private key is primarily used to authorize the transaction. A private key is like a code or password that permits you to spend a cryptocurrency coin. Thus, it should be kept private. The public key, on the other hand, is used to validate a transaction after it has been submitted. It can be publicly disseminated in the form of an address to procure cryptocurrency. Cryptography is a means of transmitting confidential communication between two users using a mathematical technique to encrypt the message. Without encryption, the entire concept of cryptocurrencies is obsolete, because then unauthorized users would be able to decipher the transaction or data.

Cryptocurrency has the potential to reinvigorate both the Indian and global economies. Owing to the decentralized mode of transaction, sectors like Agriculture, Banking, Energy, etc. have been radically affected. The bitcoin industry has provided India with a significant possibility for economic development. Missing out on this new technological revolution would be a costly mistake for India. The potential economic rewards of the bitcoin industry are enormous, and other countries are already benefitting. In Asia,  Thailand and the Philippines have floated the idea of drafting legislative rules to help their local cryptocurrency markets flourish, as well as developing standards to improve investor confidence and obtaining licenses for a number of crypto exchanges.

COVID-19 has had a detrimental impact on the Indian economy and the global market at large. Regardless, crypto has spawned job opportunities in India and overseas in a spectrum of areas and approximately 300 start-ups have resulted in the creation of thousands of jobs as well as hundreds of millions of dollars in revenue and taxes. India will inexorably draw tech talent as a result of the continuous progress. Thus, Cryptocurrency technology offers the potential to provide a huge boost to our economy’s strength. It has the ability to lay new economic and social foundations for us. However, while blockchain will have a massive influence, it will take years for it to permeate existing economic and social systems.

Legal Position of cryptocurrencies in India

The landmark case of Internet and Mobile Association of India v. Reserve Bank of India [(2020) 10 SCC 274] silhouettes India’s most recent legal position on cryptocurrency.


The Reserve Bank of India (RBI), on April 4, 2018, released a statement on “Developmental and Regulatory Policies” instructing the entities governed by RBI (1) not to engage in virtual currencies or impart any service to business organization or Individual that specifically trade with virtual currencies and (2) to end the relationship with such entities or individual that trade with virtual currencies. Further, the RBI released a Circular in exercise of authority granted by Section 35-A read in conjunction with Section 36(1)(a) and Section 56 of Banking Regulation Act, 1949 (BR Act 1949) ,and Section 45-JA and 45L of Reserve Bank of India Act, 1934, (RBI Act 1934) and Section 10(2) read with Section 18 of Payment and Settlement System Act, 2007(PSS Act 2007), guiding the entities which are governed by RBI not to engage in virtual currencies or offer any service to business organization or individual that specifically trade with virtual currencies and (2) to end the relationship with such entities or Individual that trade with virtual currencies.

Reasoning for contesting the circular issued by RBI

  1. Virtual currencies cannot be equated to legal tender and thus it does not fall within the purview of BR Act 1949 or RBI Act 1934.
  2. Virtual currencies are not subject to credit system of the country.
  3. The authority to modulate the financial system under section 45-JA and credit system of the country under Section 45-L of the RBI Act 1934 are not flexible so as to involve goods which specifically do not within the ambit of financial and credit system of the country.
  4. All the stakeholders like Department of Economics Affairs of India’s government, Central Board of Direct Taxes, etc. have rationally perceived the positive factors of cryptocurrencies as well as distributed ledger technology and thus preferred a regulatory framework. The RBI, however, has taken an irrational stance.
  5. The RBI has infringed the fundamental right to practice any profession or to carry on any occupation trade or business envisaged under Article 19(1)(g) of the Indian Constitution.
  6. It’s a true conundrum that blockchain technology is suited for RBI but not cryptocurrency.

RBI’s Statement to the Disputed Grounds

  1. Virtual currencies do not qualify the specifications to be recognized as a currency such as means of exchange, unit of value, etc.
  2. Virtual currency, to manage any consumer disputes effectively, do not have well-structured framework.
  3. Owing to pseudo-anonymity, virtual currencies can be used for an illegitimate purpose.
  4. No person has an unrestricted fundamental right to conduct any business/trade on the system of RBI-governed entities.
  5. The disputed circular has been released in exercise of power under BR Act 1949, RBI Act 1934 and PSS Act 2007.
  6. The expanding use of digital currencies could undermine financial viability of Indian currency as well as credit system.

 Issue before the Court

Whether the RBI’s statement on “Developmental and Regulatory Policies” as well as the circular are liable to be overturned?

Verdict of the Court

Once it has been established that some organizations/institutions have acknowledged digital currencies as an authentic form of payment regarding the purchase of goods/commodities and services then there is no way to circumvent the conclusion that consumers as well as dealers are engaged in an activity that comes within the jurisdiction of RBI. If an intangible property, under specific conditions, can function as a money, then RBI can certainly regulate it. The statutory duty, as a Central Bank, of RBI would necessarily require them to fix any issues that are deemed as posing a threat to country’s currency, payment, credit and financial system.

Section 45-JA and 45-L of RBI Act as well as Section 35-A of BR Act permits the RBI to issue appropriate directives if it is convinced that certain parameters prevail. The RBI, without initiating any drastic action, has been debating the matter for nearly a period of five years. As a result, RBI can scarcely be accused of not deploying its intellect. There is no doubt that RBI has the authority to release certain directives to its governed entities in the welfare of consumers or banking firms or general public. If RBI’s exercise of authority in order to realize the either of these goals inadvertently produces collateral harm to one of the many activities that are not covered by the legislative authority then the latter cannot be blamed on the colorable exercise of power or malice in law. The contested circular issued by RBI does not fit into either of these classes.

The Court, while determining the legality of a legislation limiting the conduct of a business or profession, must cogitate about (a) the immediate effect on constitutional rights, (b) the greater general interest sought to be protected in context of the goal sought to be realized, (c) the requirement of constraining individual’s autonomy and (d) intrinsic deleterious aspect of the prohibited act and (e) the potential of realizing the objective by enforcing a less severe restriction. The buying and selling of cryptocurrencies via virtual currencies swaps may be a hobby or as a business. People who purchase and offer cryptocurrencies, as a hobby, are not eligible to base their argument under Article 19(1)(g) of the India’s Constitution since it includes business /trade, vocation and profession only. Those engaging in the trade or business of selling and buying digital currencies, as well as those who operate virtual currency swaps, fall under the second and third categories of citizens. The second category cannot argue that the disputed RBI’s decision has resulted in the closure of their business. It is only the third category of citizen that have been adversely affected by the disputed RBI’s circular. The guidelines issued by the RBI must meet the proportionality test because the circular has eliminated the cryptocurrencies from the country’s industrial map and therefore impinged on Article 19(1)(g) of the India’s constitution.

Further, over the previous five years or more, the RBI has found no evidence that virtual currency exchange activity has had a devastating effect on the way regulated enterprises operate. The RBI has not stated that either of the entities regulated by it has endured any detrimental effect, explicitly or implicitly as a result of the virtual currency exchanges’ engagement with any of them. Accordingly, the Supreme Court has ruled that the RBI’s circular is likely to be overturned.


This landmark judgment is certainly a boon to crypto-based organizations. However, it is only a temporary respite. The Indian government has formerly attempted to enact the Banning of Cryptocurrency and Regulation of Official Digital Currency Bill, 2019, which aims to outlaw cryptocurrency mining, retaining, selling, trading, issue, disposal, and usage across the country. Bitcoin is a fascinating breakthrough that has the proficiency to catalyzeconstructive and potentially transformative advances in commerce as well as transactions[iii].The application of public-key cryptography as well as peer-to-peer connectivity has eliminated the hassle of double-spending that had hitherto rendered decentralized virtual currencies impractical. It’s worth noting that cryptocurrencies, in India, are not unlawful but they are not adequately regulated. For the time being, there is no regulatory framework in place to control its operation. This suggests that a person can buy, vend and retain Bitcoin in the form of investment but there is no regulatory authority to oversee it and thus leaving a window for scams. For investors, this certainly raises the stakes to a great extent. It is a critical requirement of the hour that India should strive to take advantage of this technology’s ground-breaking capability in order to strengthen its position as a global IT giant. Accordingly, the Government, either as an asset or a means of exchange, should regulate the deployment of cryptocurrencies in India.

[i] Jerry Brito and Andria Castillo, BITCOIN: A Primer for Policymaker, 2nd ed. 2016, p.6

[ii] Ibid

[iii] See Supra Note 2 at 73

Yatharth Chauhan is currently reading BA.LLB at the School of Law, Justice and Governance, Gautam Buddha University, Greater Noida. He is an accomplished content writer with a track record of success in the legal industry. He is adept in legal writing and legal research. He has a strong interest in Intellectual Property Rights and Technology Law. He is available at yatharthchauhan08[at]

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Finding Fulcrum to Move the World Economics



Domenico Fetti / Wikimedia Commons

Where hidden is the fulcrum to bring about new global-age thinking and escape current mysterious economic models that primarily support super elitism, super-richness, super tax-free heavens and super crypto nirvanas; global populace only drifts today as disconnected wanderers at the bottom carrying flags of ‘hate-media’ only creating tribal herds slowly pushed towards populism. Suppose, if we accept the current indices already labeled as success as the best of show of hands, the game is already lost where winners already left the table. Finding a new fulcrum to move the world economies on a better trajectory where human productivity measured for grassroots prosperity is a critically important but a deeply silent global challenge. Here are some bold suggestions

ONE- Global Measurement: World connectivity is invisible, grossly misunderstood, miscalculated and underestimated of its hidden powers; spreading silently like an invisible net, a “new math” becomes the possible fulcrum for the new business world economy; behold the ocean of emerging global talents from new economies, mobilizing new levels of productivity, performance and forcing global shifts of economic powers. Observe the future of borderless skills, boundary less commerce and trans-global public opinion, triangulation of such will simply crush old thinking.

Archimedes yelled, “…give me a lever long enough and a fulcrum on which to place it, and I shall move the world…”

After all, half of the world during the last decade, missed the entrepreneurial mindset, understoodonly as underdog players of the economy, the founders, job-creators and risk-taker entrepreneurs of small medium businesses of the world, pushed aside while kneeling to big business staged as institutionalized ritual. Although big businesses are always very big, nevertheless, small businesses and now globally accepted, as many times larger. Study deeply, why suddenly now the small medium business economy, during the last budgetary cycles across the world, has now become the lone solution to save dwindling economies. Big business as usual will take care of itself, but national economies already on brink left alone now need small business bases and hard-core raw entrepreneurialism as post-pandemic recovery agendas.

TWO – Ground Realities:  National leadership is now economic leadership, understanding, creating and managing, super-hyper-digital-platform-economies a new political art and mobilization of small midsize business a new science: The prerequisites to understand the “new math” is the study of “population-rich-nations and knowledge rich nations” on Google and figure out how and why can a national economy apply such new math. 

Today a USD $1000 investment in technology buys digital solutions, which were million dollars, a decade ago.Today,a $1000 investment buys on global-age upskilling on export expansion that were million dollars a decade ago.  Today, a $1000 investment on virtual-events buys what took a year and cost a million dollars a decade ago. Today, any micro-small-medium-enterprise capable of remote working models can save 80% of office and bureaucratic costs and suddenly operate like a mini-multi-national with little or no additional costs.

Apply this math to population rich nations and their current creation of some 500 million new entrepreneurial businesses across Asia will bring chills across the world to the thousands of government departments, chambers of commerce and trade associations as they compare their own progress. Now relate this to the economic positioning of ‘knowledge rich nations’ and explore how they not only crushed their own SME bases, destroyed the middle class but also their expensive business education system only produced armies of resumes promoting job-seekers but not the mighty job-creators. Study why entrepreneurialism is neither academic-born nor academic centric, it is after all most successful legendary founders that created earth shattering organizations were only dropouts.  Now shaking all these ingredients well in the economic test tube wait and let all this ferment to see what really happens.

Now picking up any nation, selecting any region and any high potential vertical market; searching any meaningful economic development agenda and status of special skills required to serve such challenges, paint new challenges. Interconnect the dots on skills, limits on national/global exposure and required expertise on vertical sectors, digitization and global-age market reach. Measuring the time and cost to bring them at par, measuring the opportunity loss over decades for any neglect. Combining all to squeeze out a positive transformative dialogue and assemble all vested parties under one umbrella.

Not to be confused with academic courses on fixing Paper-Mache economies and broken paper work trails, chambers primarily focused on conflict resolutions, compliance regulations, and trade groups on policy matters.  Mobilization of small medium business economy is a tactical battlefield of advancements of an enterprise, as meritocracy is the nightmarish challenges for over 100 plus nations where majority high potential sectors are at standstill on such affairs. Surprisingly, such advancements are mostly not new funding hungry but mobilization starved. Economic leadership teams of today, unless skilled on intertwining super-hyper-digital-platform-economic agendas with local midsize businesses and creating innovative excellence to stand up to global competitiveness becomes only a burden to growth.

The magnifying glass of mind will find the fulcrum: High potential vertical sectors and special regions are primarily wide-open lands full of resources and full of talented peoples; mobilization of such combinations offering extraordinary power play, now catapulted due to technologies. However, to enter such arenas calls for regimented exploring of the limits of digitization, as Digital-Divides are Mental Divides, only deeper understanding and skills on how to boost entrepreneurialism and attract hidden talents of local citizenry will add power. Of course, knowing in advance, what has already failed so many times before will only avoid using a rubber hose as a lever, again.  

The new world economic order: There is no such thing as big and small as it is only strong and weak, there is no such thing as rich and poor it is only smart and stupid. There is no such thing as past and future is only what is in front now and what is there to act but if and or when. How do you translate this in a post pandemic recovery mode? Observe how strong, smart moving now are advancing and leaving weak, stupid dreaming of if and when in the dust behind.

The conclusion: At the risk of never getting a Nobel Prize on Economics, here is this stark claim; any economy not driven solely based on measuring “real value creation” but primarily based on “real value manipulation” is nothing but a public fraud. This mathematically proven, possibly a new Fulcrum to move the world economy, in need of truth

The rest is easy  

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Evergrande Crisis and the Global Economy



China’s crackdown on the tech giants was not much of a surprise. Sure, the communist regime allowed the colossus entities like Alibaba Group to innovate and prosper for years. Yet, the government control over the markets was never concealed. In fact, China’s active intervention in the forex market to deliberately devalue Yuan was frequently contested around the world. Ironically, now the world awaits government intervention as a global liquidity crisis seems impending. The Evergrande Group, China’s largest property developer, is on the brink of collapse. Mounding debt, unfinished properties, and subsequent public pressure eventually pushed the group to openly admit its financial turmoil last week. Subsequently, Evergrande’s shares plunged as much as 19% to more than 11-year lows. While many anticipate a thorough financial restructuring in the forthcoming months, the global debt markets face a broader financial contagion – as long as China deliberates on its plan of action.

The financial trouble of the conglomerate became apparent when President Xi Jinping stressed upon controlled corporate debt levels in his ongoing drive to reign China’s corporate behemoths. It is estimated that the Evergrande Group currently owes $305 billion in outstanding debt; payments on its offshore bonds due this week. With new channels of debt ceased throughout the Mainland, repayment seems doubtful despite reassurances from the company officials. The broader cause of worry, however, is the impact of a default; which seems highly likely under current circumstances.

The residential property market and the real estate market control roughly 20% and 30% of China’s nominal GDP respectively. A default could destabilize the already slowing Chinese economy. Yet that’s half the truth. In reality, the failure of a ‘too big to fail’ company could bleed into other sectors as well. And while China could let the company fail to set a precedent, the spillover could devastate the financial stability hard-earned after a strenuous battle against the pandemic. Recent data shows that with the outbreak of the delta variant, the demand pressure in China has significantly cooled down while the energy prices are through the roof. Coupled with the regulatory crackdown rapidly pervading uncertainty, a debt crisis could further push the economy into a recession: a detrimental end to China’s aspirations to attract global investors.

The real question, therefore, is not about China’s willingness to bail out the company. Too much is at stake. The primal question is regarding the modus operandi which could be adopted by China to upend instability.

Naturally, the influence of China’s woes parallels its effect on the global economy. A possible liquidity crisis and the opaque measures of the government combined are already affecting the global markets: particularly the United States. The Dow Jones Industrial Average (DJIA) posted a dismal end to Monday’s trading session: declining by more than 600 points. The 10-year Treasury yields slipped down 6.4 basis points to 1.297% as investors sought safety amid uncertainty. The concern is regarding China’s route to solve the issue and the timeline it would adopt. While the markets across Europe and Asia are optimistic about a partial settlement of debt payments, a take over from state-owned enterprises could further drive uncertainty; majorly regarding the pay schedule of western bondholders amid political hostility.

Economists believe that, while a financial crisis doesn’t seem like a plausible threat, a delayed response or a clumsy reaction could permeate volatility in the capital markets globally. Furthermore, a default or a takeover would almost certainly pull down China’s economy. While the US has already turned stringent over Chinese IPOs recently, a debt default could puncture the economic viability of a wide array of Chinese companies around the world. And thus, while the global banking system is not at an immediate threat of a Lehman catastrophe, Evergrande’s bankruptcy would, nonetheless, erode both the domestic and the global housing market. Moreover, it would further dent Chinese imports (and seriously damage regional exchequers), and would ultimately put a damper on global economic recovery from the pandemic.

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Economy Contradicts Democracy: Russian Markets Boom Amid Political Sabotage



The political game plan laid by the Russian premier Vladimir Putin has proven effective for the past two decades. Apart from the systemic opposition, the core critics of the Kremlin are absent from the ballot. And while a competitive pretense is skilfully maintained, frontrunners like Alexei Navalny have either been incarcerated, exiled, or pushed against the metaphorical wall. All in all, United Russia is ahead in the parliamentary polls and almost certain to gain a veto-proof majority in State Duma – the Russian parliament. Surprisingly, however, the Russian economy seems unperturbed by the active political manipulation of the Kremlin. On the contrary, the Russian markets have already established their dominance in the developing world as Putin is all set to hold his reign indefinitely.

The Russian economy is forecasted to grow by 3.9% in 2021. The pandemic seems like a pained tale of history as the markets have strongly rebounded from the slump of 2020. The rising commodity prices – despite worrisome – have edged the productivity of the Russian raw material giants. The gains in ruble have gradually inched higher since January, while the current account surplus has grown by 3.9%. Clearly, the manufacturing mechanism of Moscow has turned more robust. Primarily because the industrial sector has felt little to no jitters of both domestic and international defiance. The aftermath of the arrest of Alexei Navalny wrapped up dramatically while the international community couldn’t muster any resistance beyond a handful of sanctions. The Putin regime managed to harness criticism and allegations while deftly sketching a blueprint to extend its dominance.

The ideal ‘No Uncertainty’ situation has worked wonders for the Russian Bourse and the bond market. The benchmark MOEX index (Moscow Exchange) has rallied by 23% in 2021 – the strongest performance in the emerging markets. Moreover, the fixed income premiums have dropped to record lows; Russian treasury bonds offering the best price-to-earning ratio in the emerging markets. The main reason behind such a bustling market response could be narrowed down to one factor: growing investor confidence.

According to Bloomberg’s data, the Russian Foreign Exchange reserves are at their record high of $621 billion. And while the government bonds’ returns hover at a mere 1.48%, the foreign ownership of treasury bonds has inflated above 20% for the second time this year. The investors are confident that a significant political shuffle is not on cards as Putin maintains a tight hold over Kremlin. Furthermore, investors do not perceive the United States as an active deterrent to Russia – at least in the near term. The notion was further exacerbated when the Biden administration unilaterally dropped sanctions from the Nord Stream 2 pipeline project. And while Europe and the US remain sympathetic with the Kremlin critics, large economies like Germany have clarified their economic position by striking lucrative deals amid political pressure. It is apparent that while Europe is conflicted after Brexit, even the US faces much more pressing issues in the guise of China and Afghanistan. Thus, no active international defiance has all but bolstered the Kremlin in its drive to gain foreign investments.

Another factor at work is the overly hawkish Russian Central Bank (RCB). To tame inflation – currency raging at an annual rate of 6.7% – the RCB hiked its policy rate to 6.75% from the all-time low of 4.25%. The RCB has raised its policy rate by a cumulative 250 basis points in four consecutive hikes since January which has all but attracted the investors to jump on the bandwagon. However, inflation is proving to be sturdy in the face of intermittent rate hikes. And while Russian productivity is enjoying a smooth run, failure of monetary policy tools could just as easily backfire.

While political dissent or international sanctions remain futile, inflation is the prime enemy which could detract the Russian economy. For years Russia has faced a sharp decline in living standards, and despite commendable fiscal management of the Kremlin, such a steep rise in prices is an omen of a financial crisis. Moreover, the unemployment rates have dropped to record low levels. However, the labor shortage is emerging as another facet that could plausibly ignite the wage-price spiral. Further exacerbating the threat of inflation are the $9.6 billion pre-election giveaways orchestrated by President Putin to garner more support for his United Russia party. Such a tremendous demand pressure could presumably neutralize the aggressive tightening of the monetary policy by the RCB. Thus, while President Putin sure is on a definitive path of immortality on the throne of the Kremlin, surging inflation could mark a return of uncertainty, chip away investors’ confidence: eventually putting a brake on the economic streak.

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