Cryptocurrencies have been in the news recently because taxes authorities believe they may be used to launder money and evade taxes. However, Best Court appointed an unique Research Team on Black Cash recommended that trading in such currency be disappointed. While China was reported to have banned some its major Bitcoin trading operators, countries including the UNITED STATES and Canada have regulations in location to restrict stock trade in cryptocurrency. Cryptocurrency types

Accurately what is Cryptocurrency?

Cryptocurrency, as the name implies, uses encrypted codes to effect a transaction. These kinds of codes are recognized by other computers in the user community. Instead of using paper money, an online ledger is up to date by ordinary bookkeeping items. The buyer’s account is debited and the seller’s account is credited with such currency. 

How are Transactions Made on Cryptocurrency?

When a transaction is initiated by one consumer, her computer sends away a public cipher or public key that interacts with the private cipher of anyone obtaining the currency. In case the receiver will take the transaction, the commencing computer attaches a part of code onto a block of several such encrypted codes that may every user in the network. Special users called ‘Miners’ can attach the additional code to the widely shared block by fixing a cryptographic puzzle and earn more cryptocurrency along the way. Once a miner agrees with a transaction, the record in the block are unable to be changed or wiped.

BitCoin, for instance, can be used on mobile phones as well to enact purchases. All you need do is let the receiver scan a QR code from an software on your smart phone or bring them face to face through the use of Close to Field Communication (NFC). Be aware that this is very similar to ordinary online wallets such as PayTM or MobiQuick.

Die-hard users swear by BitCoin due to its decentralized nature, international popularity, anonymity, permanence of ventures and data security. As opposed to paper currency, no Central Bank controls inflationary challenges on cryptocurrency. Transaction ledgers are stored in a Peer-to-Peer network. That means every computer chips in its computing power and copies of databases are stored on every such node in the network. Banks, on the other hand, store transaction data in central repositories which are in the hands of private individuals appointed by the firm.

How could Cryptocurrency be used for Money Laundering?

The very fact that there is no control of cryptocurrency transactions by Banks or tax authorities means that transactions cannot continually be marked to a particular person. This means that we don’t know whether or not the transactor has obtained a store of value legally or not. The transactee’s store is similarly suspect as no one can tell what consideration was handed for the currency received.

What does Indian Law State about such Virtual Foreign currencies?

Virtual Currencies or cryptocurrencies are commonly seen as pieces of software and hence classify as a good under the Sales of products Act, 1930.

Being a good, roundabout taxes on their deal or purchase as well as GST on the skills provided by Miners would be applicable to them.

There is still quite somewhat of confusion about whether cryptocurrencies are valid as currency in India and the RBI, which has authority over fixing and payment systems and pre-paid negotiable instruments, has certainly not authorized buying and selling via this medium of exchange.

Any kind of cryptocurrencies received by a resident in India would thus be governed by the Foreign Exchange Supervision Act, 1999 as an import of goods into this country.