A recent Orissa High Court order in a criminal case has ruled that dealings in cryptocurrency are not illegal under Indian law.

The court observed that cryptocurrency is not money within the meaning of the Price Chits and Money Circulation Schemes (Banning) Act 1978. It said the investment made by the general public in cryptocurrency could not partake the nature of the deposit within the meaning of the Odisha Protection of Interests of Depositors Act.

The court said there was no evidence to show that the petitioners had convinced members of the general public to invest money on promise of high returns. Or that any person was defrauded or his investment misappropriated by the petitioners.

“It is clear that the petitioners were dealing with crypto currency which, as on date, is not illegal,” the order said. “The amounts invested are kept secure in a Trust Wallet of the investor without any scope of interference or manipulation by any other person.”

“The ruling affirms that dealing in crypto currency is not illegal. Be that as it may, it would be interesting to see the implications of the same under different laws such as the Income-Tax Act, 1961, which prescribes a defined mode of undertaking the transaction or GST laws wherein the consideration towards supply of goods/services can be paid by a mode other than money too,” said Ashish Karundia, Founder, Ashish Karundia & Co.

Centre’s stance

The Supreme Court in 2020 set aside the Reserve Bank of India’s April 6, 2018, circular prohibiting banks and entities regulated by it from providing services related to virtual currencies.

A new taxation framework was introduced in the Finance Act 2022 to provide for the taxation and withholding of tax for virtual digital assets, including cryptocurrencies. Investors must pay a 30 per cent tax on income from select cryptocurrencies without deducting the loss incurred on other assets.

Earlier this year, the Centre told the Supreme Court it has yet to decide on a mechanism to regulate cryptocurrencies and effectively investigate related offences.

The present case

The matter involves two individuals who allegedly operated a Ponzi scheme. They targeted individuals and encouraged them to invest in the cryptocurrency STA Token by building a network of members.

The investors were asked to recruit further investors on payment of interest or bonus, which was expected to increase correspondingly to the number of members they added. The company, STA (Solar Techno Alliance), is a Netherlands-based company that launched STA Token over Block Chain in Binance Crypto exchange in 2022.