Tesla’s bid on bitcoin has helped the cryptocurrency propel to new record levels. Elon musk’s recent tweets about bitcoin and dogecoin coupled with his company’s investment of $1.5 billion has led to the surge in demand for the cryptocurrency.
Many wealthy Indian investors are rushing to seek legal opinion on the purchase of the contentious cryptocurrency. Tesla recently announced that it will in near optimistic future accept bitcoin as payment and its recent investment will provide more liquidity for the company in future.
Speculations around the digital asset are rising that Indian authorities might declare the cryptocurrency as illegal. Cryptocurrencies has always had an unlikely detestable equation with the authorities, as it is unregulated. Authorities maintain the view that the digital currency will lead to a surge in money laundering cases and is not feasible because of its volatile nature.
While exchanging cryptocurrency, the identity of the user isn’t revealed or identified and that is the real danger in legalizing cryptocurrencies. This anonymous and unidentified investment can lead to terror financing and human trafficking on the dark web. As a matter of fact, many a times cryptocurrencies have also been demanded as ransom for trafficking so that the perpetrator can not be identified. To top it all, cryptocurrencies are hard to track and tax which will lead to huge revenue losses for the government.
Despite Given its regulatory ambiguity, several wealthy families had purchased bitcoin through Liberalized Remittance Scheme (LRS). These concerned wealthy families are now approaching lawyers , to acquire knowledge on the contentious matter that whether selling the digital asset might put them on the wrong side of the law, before the law is put in place.
A leading lawyer stated that “most of them knew the risks involved. However, they thought that the government will be more accommodative on Bitcoin after the Supreme court verdict last year.”
This comes after RBI virtually had banned cryptocurrency in 2018 and had forbidden all regulated entities, such as banks, from allowing to trade them. But it was in march 2020, when Supreme court maintained that such curbs were illegal. The supreme court’s ruling made it seem to many investors that the digital asset would eventually become a legal tender.
Speculations about ban on cryptocurrency grew when Finance Minister Nirmala Sitaraman stated in February 2021 that “a high level inter-ministerial committee (IMC) recommended a ban on all private cryptocurrencies, except any virtual cryptocurrencies issued by the state”.
Industry estimates strongly suggest that at least $15-20 million have already been invested by the Indians in cryptocurrencies. These investors now worry that such purchase or investment can be termed as illegal or violation of law, especially since the Enforcement Directorate has jurisdiction over foreign exchange transitions.
“there has been an ambiguity on treatment of cryptocurrencies from an exchange control perspective, especially so far as transactions undertaken under the liberalized remittance scheme” said Moin Ladha , partner, Khaitan and co. “it will be necessary to grandfather such bonafide investments and provide clarity on how such existing investors should deal with it”.