The term ‘mining’ in the context of cryptocurrency means the process of creating a new cryptocurrency, which is built on computers solving a complex mathematical problem. It involves the creation and validation of new coins in the blockchain.
This process, being fairly technical and arduous, is executed by individuals, called miners, who use their computing resources to perform the computations necessary to maintain and secure the credibility of the network. Mining is an incentivized process as miners are rewarded in the blockchain’s native currency for contributing to the processing power of the network.
TOOLS FOR CRYPTO MINING
Mining is a hardware-intensive process and requires the installation of expensive computing machines, also called ‘mining rigs’. Following is a list of software and hardware that are needed to mine the cryptocurrency.
The hardware element in mining can be a Graphics Processing Unit (“GPU”) or An Application-Specific Integrated Circuit (“ASIC”). As opposed to CPUs in normal computers, ASICs and GPUs are faster at solving complex calculations required to settle transactions. The more powerful the unit, the faster it solves problems. Another is the mining software to mine and set up a digital wallet, to store the reward that will be earned.
CRYPTOCURRENCIES MARKET IN INDIA
As per the blockchain data company Chainalysis, India has witnessed a 600 percent jump in total investment in cryptocurrencies from $923 million in April 2020 to $6.6 billion in May 2021. The company in June 2021 stated that India ranks 18th with total Bitcoin investment gains at $241 million
REGULATORY DEVELOPMENTS IN INDIA
Considering the anonymity and intractable nature of the transactions involving cryptocurrencies, the Reserve Bank of India vide its circular no. DBR.No.BP.BC.104 /08.13.102/2017-18 dated April 6, 2018 (“2018 Circular”), prohibited the entities regulated by it, to deal in the virtual currencies
(“VCs”) or provide services for facilitating any person or entity in dealing with or settling VCs. Such services included maintaining accounts, registering, trading, settling, clearing, giving loans against virtual tokens, accepting them as collateral, opening accounts of exchanges dealing with them and transfer / receipt of money in accounts relating to purchase/ sale of VCs.
On the lines of the above prohibitory circular, the mining, trading and other allied activities related to the cryptocurrency were sought to be regulated in India, when the draft bill on “Banning ofCryptocurrency and Regulation of Official Digital Currency Bill, 2019 (“2019 Bill”) was preparedon the basis of recommendations by the expert committee constituted in the year 2017.However, this bill could not be introduced in Parliament owing to uncited issues.
The bill defined Cryptocurrency as any information, code, or token which has a digital representation of value and has utility in business activity or acts as a store of value, or a unit of account. It prohibited mining, holding, selling, trading, issuance, disposal or use ofcryptocurrency in the country.
Thereafter, Hon’ble Supreme Court set aside the 2018 Circular on March 04, 2020 in the matter of Writ Petition (Civil) No.528 of 2018 (Internet and Mobile Association of India v. Reserve Bank of India). Hence, the prohibitory circular ceased to be in effect therefrom.
Further, owing to the catalytic progress of the cryptocurrencies transactions around the globe including the developing Indian markets, another committee was constituted and draft bill on The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 was prepared. This billsought to ban the private cryptocurrencies operating in the country and facilitate the creation of an official digital currency.
Pending the formal adoption of the bill, the Reserve Bank of India (RBI) vide its circular no. DOR. AML.REC 18 /14.01.001/2021-22 dated May 31, 2021, have announced that banks to allow cryptocurrency trades with routine due diligence measures on the same. The apex bank has also nulled the circular issued in 2018 that asked the regulated entities to not facilitate cryptocurrencies exchanges.
In view of the above regulatory advances, it is a suggested inference that the Indian laws do not contain an express statutory prohibition for mining, trading, possession and other incidental activities related to cryptocurrencies and hence, the same may be undertaken in India after following the due diligence process.
CRYPTOCURRENCY EXCHANGE IN INDIA
CoinDCX, which was founded in 2018, has become India's first cryptocurrency exchange to achieve unicorn status after it raised $90 million in a Series C funding round led by Facebook co-founder Eduardo Saverin's B Capital Group. The latest funding round values CoinDCX at $1.1 billion.
The Investments in the exchange surged after the Supreme Court last year quashed a ban on banks facilitating crypto trades.
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