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Fintech Market Overview

This article does not constitute legal advice.

Virtual currencies in India

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The Supreme Court, in its judgment, observed that although virtual currencies are not considered 'legal tender', they can perform most functions of real currency, and accordingly, certain virtual currencies can qualify as payment, securities or commodity. India's Ministry of Finance has published a report to address the lacunae in regulating virtual currencies, including tokens, where it notes that categorising tokens based on their characteristics is imperative from a regulatory standpoint. Accordingly, tokens can be grouped into utility tokens (used to grant access to a company's products) and security tokens (representations of investment in a company). Further, to determine whether tokens can be treated as securities, and thus fall within the purview of regulators, the report suggests employing the use of the Howey test. However, the report does not detail any proposed regulatory measures to govern the finer aspects, such as the linking of tokens to underlying assets or the nature of assets to which tokens can be linked. Recently, it has been reported that the central government intends to introduce a bill through which it seeks to regulate virtual digital assets in India. In fact, the Finance Minister of India, in the Budget Speech for 2022, has introduced a tax at a flat rate of 30 per cent on virtual digital assets (despite not commenting on the legitimacy of these assets), and the Finance Bill has introduced a broad definition of the term 'virtual digital assets', which also includes non-fungible tokens. Another announcement in the Budget Speech for 2022 related to the RBI launching a central bank-backed digital currency within the 2022–2023 financial year.1

Smart contracts in India

Fintech in India

Fintech in other countries

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