| Pub. Date | : Jan, 2021 |
|---|---|
| Product Name | : The IUP Journal of Law Review |
| Product Type | : Article |
| Product Code | : IJLR20121 |
| Author Name | :P Sree Sudha |
| Availability | : YES |
| Subject/Domain | : Arts & Humanities |
| Download Format | : PDF Format |
| No. of Pages | : 9 |
Cryptocurrency is a digital representation of value that is not a legal tender. It is a digital asset, sometimes also referred to as a crypto asset that works as a medium of exchange for goods and services between the parties who agree to use it. Strong encryption techniques are used to control how units of cryptocurrency are created and to verify transactions. Cryptocurrencies generally operate independently of a central bank, central authority or government. India ranks among the top five countries of the world from the perspective of share of currency held, which is at 44% of the world's share. Since the regulatory framework regarding cryptocurrencies in India is uncertain, this paper analyzes the taxation (or non-taxation) by considering them as goods and currency, and the major approaches currently prevalent across the world. The focus of this paper is to explain the legal aspects relating to cryptocurrencies and blockchain.
As of 2021, there exist several hundreds of cryptocurrencies, the most popular being 'Bitcoin'. Since its inception in November 2008, bitcoin has shown immense promise as an alternative to the traditional methods of monetary exchange. Bitcoin is the world's first private, digital cryptocurrency that functions solely on the basis of peer-to-peer network. At present, most countries in the world function on fiat currencies issued by the government as money and possessing value by virtue of a government decree. A prime essential of these currencies is that they need a central regulatory body to govern them, meaning thereby that the value is derived in some abstract manner from the sovereign authority of the state.1 However, such a system suffers from the intrinsic weaknesses of the trust-based model, with huge dependence on financial institutions to process payments. Cryptocurrencies, on the other hand, use cryptography to manage the creation of new units and secure transactions. They offer 'crypto proof' as an alternative to trust and allow two parties to transact with each other securely, without the need for a trusted third party. The value of such currency is not derived from government fiat or gold, but is based on the value that people assign to it.2 India ranks