Aditya Kamlesh Singh, BBA LLB, Jindal Global Law School
ABSTRACT
This paper investigates the complex and evolving legal landscape of cryptocurrency regulation in India, particularly as it contrasts with the introduction of the Central Bank Digital Currency (CBDC), known as the Digital Rupee. With India at a crossroads between outright banning private cryptocurrencies and cautiously advancing its digital currency, this dual approach highlights a need for cohesive regulation. The study begins by analyzing India’s historical regulatory stance on cryptocurrency, from the RBI’s 2018 banking ban and the subsequent Supreme Court verdict in Internet and Mobile Association of India v. Reserve Bank of India (2020), which lifted these restrictions, to the tentative steps taken towards formal regulation in 2023. These past and current regulatory trends reveal a landscape marked by both enthusiasm and apprehension regarding digital assets.
The introduction of the Digital Rupee, positioned as a controlled and stable digital currency, offers new opportunities for financial inclusion, transparency, and reduced reliance on cash. This paper explores how the CBDC could potentially reshape India’s financial system while maintaining governmental oversight. However, the coexistence of the Digital Rupee with decentralized cryptocurrencies presents several regulatory challenges, including Anti-Money Laundering (AML) concerns, financial stability risks, and consumer protection issues. Through a comparative analysis, this paper juxtaposes the centralized, government-backed nature of the Digital Rupee with the decentralized and volatile attributes of private cryptocurrencies, identifying key differences in regulatory and technological infrastructure and examining the resulting legal challenges.
The paper further addresses specific regulatory gaps, such as consumer fraud risks in cryptocurrency markets, privacy concerns within Digital Rupee transactions, and the implications for financial reporting and taxation. To provide a balanced perspective, it draws on international models, analyzing the regulatory frameworks of countries such as China, which has promoted its CBDC while banning cryptocurrencies, the European Union, which has developed a regulatory approach to cryptocurrency alongside a potential digital euro, and the United States, which remains in an exploratory phase for both.
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