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Fintech Market Overview

This article does not constitute legal advice.

Cryptocurrencies in India

Fintech Software

Currently, blockchain technologies and cryptocurrencies operate in a realm of legal uncertainty in India as there are no specific regulations governing them. In 2018, the RBI had issued a circular directing regulated entities not to deal in virtual currencies, nor provide services for facilitating, dealing with or settling virtual currencies, and to exit relationships where these services were already being provided. In 2020, the Supreme Court of India struck down this circular on the constitutional grounds of proportionality, observing that the RBI's consistent stand is that it has not banned virtual currencies, and the RBI has failed to show how regulated entities have suffered any loss on account of their interface with virtual currency exchanges. In its judgment, the Supreme Court did not give its own opinion on whether virtual currencies are or should be prohibited but deferred that to the regulators and the Parliament. Following this judgment, banks continued quoting the RBI's circular to caution customers against trading in virtual currencies. However, the RBI subsequently clarified that banks (along with payment system providers, NBFCs, etc.) can continue facilitating trade in virtual currencies, but must undertake customer due diligence measures under extant regulations and guidelines.1

Cryptocurrencies have not yet been specifically addressed under the money laundering regulatory framework in India. Meanwhile, the cryptocurrency industry has formulated a code of conduct covering norms pertaining to anti-money laundering standards. The code is sought to be updated given the recent heightened scrutiny of the sector by regulators and law enforcement agencies due to suspected cases of money laundering. Regarding issues in cross-border cryptocurrency transactions, as the RBI has not notified this as official currency, ascertaining whether cryptocurrency will be a permitted capital account transaction, or current account transaction, will be difficult under applicable laws.1

Virtual currencies in India

Fintech in India

Fintech in other countries

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Indian Fintech Lawyers

Ilya Druzhinin

Ilya Druzhinin

I have over 22 years of experience in legal practice, most of which is accompanied by e-com and fintech projects

Languages: RU EN

Notes
  1. https://thelawreviews.co.uk/title/the-financial-technology-law-review/india
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