July 17, 2024

2024-06-14 03:02:53 ET

A significant decision from an Indian high court states cryptocurrency transactions are lawfully valid. This verdict is in connection with a litigation linked to a crypto-related pyramid scheme.

As per a

regional update

, the Orissa High Court’s Justice Sasikanta Mishra proclaimed that cryptocurrency does not come under the definition of money as per Indian legislation.

Alleged Pyramid Scheme

This verdict is in relation to a case associated with two individuals on suspicion of

fixing a pyramid scheme

. The deceit was built around a fictional cryptocurrency named the Yes World Token.

The con targeted private citizens and attracted investors with promising high returns. As seen in pyramid schemes, participants were encouraged to recruit more members.

Their rewards were bonuses or interest, relying on the quantity of the new members they could add.

With their multi-level marketing tactic, the deceit was able to develop an extensive user network.

The two accused reportedly established trust wallets (not to be mistaken with a

famous cryptocurrency

wallet with the same term).

Intriguingly, the accused were not indicted as no direct monetary transfer evidence from the investors to them was found.

All the funds remained with the investors’ wallets hence no concrete proof of fraudulent incentives or financial gains.

Cryptocurrency Not Considered as Money

The primary query was whether these activities are unlawful under the Odisha Protection of Interests of Depositors (OPID) Act, and India’s Prize Chits and Money Circulation Schemes (Banning) Act.

Justice’s verdict pronounced, “Cryptocurrency is not money,” concluding that the investments public made in cryptocurrency does not follow the nature of deposit within the interpretation of OPID Act.”

Therefore, the verdict concluded

Engaging in cryptocurrency transactions cannot be considered illegal or an offence under the OPID Act.

As per Mishra, the scheme operated based on a “person to platform” procedure. His explanation was

The defendant can simply be perceived to have attempted to convince the mass. The scheme being person to platform, it can’t be assumed that the defendant had unfairly deceived any person, especially as any sum of any investor’s investments continues to be secure in his or her trust wallet.

Justice Mishar’s decision parallels India’s present definition of cryptocurrencies, defined as ‘Virtual Digital Assets’, even though they lack firm regulations.

Even though they cannot be utilized as legal tender within the Indian jurisdiction, digital assets are

answerable to tax duties

like 1% TDS and 30% capital gains tax.

India is presently working on

authorizing cryptocurrency service providers

.

Further information on

Indian high court rules cryptocurrency dealings not illegal

can be found on

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Frequently Asked Questions

What is the legal status of cryptocurrencies in India?

As per the recent ruling from the Orissa High Court, dealing in cryptocurrencies or digital assets is not deemed illegal. Indian laws consider cryptocurrencies as ‘Virtual Digital Assets’. It’s important to note, however, that while they can’t be used as legal tender these virtual digital assets are subject to tax duties like 1% Total Deductible at Source (TDS) and 30% capital gains tax.

What was unique about this particular Indian cryptocurrency case?

This case was unique because it involved an alleged pyramid scheme revolving around a non-existent cryptocurrency named Yes World Token. Despite multiple investors and the creation of a vast network of users engaging in multi-level marketing, the court didn’t constitute this activity as fraudulent due to a lack of direct monetary transfer from the investors to the accused.

What are the laws that the case was evaluated against?

Two principal laws were considered in this verdict: The Prize Chits and Money Circulation Schemes (Banning) Act and the Odisha Protection of Interests of Depositors (OPID) Act. As per the ruling, cryptocurrency dealings cannot be deemed an offense under these Acts as cryptocurrencies do not fall under the definition of “money”. Thus, investments in cryptocurrencies do not partake the nature of a deposit within the meaning of the OPID Act.