Busting the Budget 2018–19 Myths: Cryptocurrencies Are Still NOT Illegal

Busting the Budget 2018–19 Myths: Cryptocurrencies Are Still NOT Illegal

Despite the repeated attempts made by the Government to urge caution among customers, cryptocurrencies have seen an upswing in the Indian market and among Indian investors. On 1st February, 2018, Hon’ble Finance Minister Mr. Arun Jaitley in his budget speech said — “The government does not consider cryptocurrencies as legal tender or coin, and will take all measures to eliminate the use of these crypto assets in financing illegitimate activities.” This seem to have swept the market with a bearish sentiment for cryptocurrency and filled the investors with scepticism. But we need to take step back and look at the bigger picture to analyse how justified are these newfound fears.

What has changed since the Budget Speech?

Nothing.

Yes. The stance iterated by the Hon’ble Finance Minister, Mr. Arun Jaitley is same as it has always been. The government has never recognised cryptocurrency as a legal tender. But just not being recognised as legal tender does not mean cryptocurrencies are illegal. It just means they’re not replacing the Indian Rupee. Further, the second part of his statement emanates from the past experiences that the Government has had with cryptocurrencies. In past there have been some instances where the cryptocurrencies were found being used for illicit activities.

Therefore, in lieu of such instances, the latter part of Mr. Jaitley’s Statement seems justified. But here we also need to look at the flip side of the statement that so long a person is not using her/his bitcoins for illicit purposes she/he need not worry about being on the wrong side of the Government.

The Bigger Picture

Cryptocurrency’s legal status is same as it was in the past. Legislature has not introduced any new regulation through the Finance Act, 2018 or any other Act which subjects the income derived from cryptocurrency trade to any penalty and/or bans the trading of cryptocurrency. It is still the unregulated virtual currency as it was in the past.

What does this mean for the investors?

The status quo with respect to the cryptocurrency is the same. Investors who have invested in the cryptocurrencies or are planning to invest in the same need to understand that their investment is as good as it was before 1st February, 2018. One can still invest in the cryptocurrency and expect returns. The income earned by the sale of the cryptocurrency is not subject to any penalty, and is viewed as legitimate taxable income.

So far as cryptocurrency as a mode of exchange for the mainstream trade is concerned, it cannot be used to trade with the mainstream vendors in India because most of the vendors don’t accept it, because it is not recognised by the government. But that does not mean that cryptocurrency cannot be used as a trading commodity at all. There are certain vendors based out of jurisdictions other than India and recognise the cryptocurrency as a legitimate digital currency. Such vendors will accept cryptocurrencies, and you can use your cryptocurrency to trade with them. Here, one needs to keep in mind that the exchange does not become illegal because it is done via cryptocurrency, but because of the nature of the goods. Therefore, only the purchase of a prohibited item using cryptocurrency will cause one to get into trouble with government. But then this would be the case even with the Indian Rupee, right?

Conclusion

The investors need not worry about the cryptocurrency. The media circus around the statement of Hon’ble Finance Minister is all noise, no show. The crypto currency is still as safe and/or as dicey an investment (depending upon how you saw it earlier) as it was before the Budget Speech. Unocoin truly supports the cause of ending illegitimate activity associated with cryptocurrencies and would wholeheartedly support the Indian government’s vision.

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