Legal challenges in the regulation and laws of cryptocurrency

Abstract

ABSTRACT Cryptocurrencies are digital tokens secured by cryptography and recorded on decentralized networks, offering innovations like peer-to-peer finance and token-based fundraising but also posing risks such as wild price swings and laundering opportunities. This study uses doctrinal analysis—reviewing laws (e.g., RBI Act, FEMA, PMLA), court rulings (such as IAMAI v. RBI), and regulatory notices—to map India’s material and procedural rules for crypto. India’s response has been fragmented: RBI cautions in 2013/17 and a 2018 banking-ban overturned in 2020 left no unified law, while the draft 2021 Bill remains pending. Tax measures in 2022 imposed a 30 % flat tax on crypto gains (Section 115BBH) and 1 % TDS on transfers above ₹10,000, but lack clear licensing or consumer safeguards. Comparative review shows the U.S. relies on SEC enforcement (Howey Test) and FinCEN’s MSB rules, whereas the EU’s MiCA sets uniform definitions, licensing, and AML/CFT standards. Key gaps in India include unclear asset definitions, no VASP registry, and weak AML “travel-rule” compliance. The dissertation recommends a technology-neutral crypto law with precise definitions, a licensing regime, mandatory KYC, consumer-protection mechanisms, and adaptive sandboxes supported by AI-driven monitoring tools