Last week, El Salvador created history by becoming the first nation to adopt Bitcoin as legal tender. Meanwhile in India, the Enforcement Directorate on Friday issued a show-cause notice to WazirX, the country’s largest cryptocurrency exchange for allegedly violating guidelines of the Foreign Exchange Management Act (FEMA) in connection with transactions worth over Rs 2,790 crore.
WazirX, the ED alleged, did not collect the requisite documents in a violation of the mandatory Anti-Money Laundering and Com-bating Financing of Terrorism precaution norms. The issue has raised doubts on the nebulous nature of transactions on the platform and the legal ramifications of investing in asset classes not deemed kosher by the Centre.
Interestingly, one of the top ranked Google searches following the ED notice to WazirX was: ‘Is cryptocurrency trade safe in India?’. As of now, over 70 lakh Indians have invested upwards of $1 bn in cryptocurrencies and the Centre has a tall order of keeping track of the legality and security of these transactions. In March, Finance Minister Nirmala Sitharaman had gone on record to say that India was not shutting out all options when it comes to cryptocurrency or blockchain.
Sithar-aman had said, “A cabinet note is being prepared, and it includes the formulation of cryptocurrency. We will allow a window for people to experiment on blockchain and Bitcoin.” As one of the first steps towards regulation, the Centre made it mandatory for companies to disclose any investments or trading done in the crypto space during a financial year.
Just three years ago, the Centre had declared that it does not consider cryptocurrencies as legal tender. The government was expected to introduce the Cryptocurrency and Regulation of Official Digital Currency Bill 2021 in the Budget Session of the Parliament in March this year. The Bill is now expected to be introduced in the monsoon session.
Preemptively, the Internet and Mobile Association of India, in association with some of India’s leading crypto exchanges is coming up with an advisory board for self-regulation. The board will be set up under the Blockchain and Crypto Assets Council. An interesting perspective was offered by blockchain and crypto investment expert Hitesh Malviya. According to him, “It might make sense to classify Bitcoin as an alternative asset class, considering the volatile nature of digital currencies, which is a deterrent to their use as a regular payment instrument.”
Disclaimer: Cryptocurrency is an unregulated digital asset and is subject to market risks