As the budget session drew to an end, cryptocurrency dealing was termed ‘not legal’ in India. Though there was a lack of regulatory measures, people have been dealing with cryptocurrencies and many were falling victims of fraud. With the rates of bitcoin rocketing sky-high and then plummeting by day, the haze around bitcoin and other currencies doesn’t seem to settle down yet. Prashant Mali, Cyber law expert and Bombay High Court advocate, in an exclusive interview with CSO Online, reveals how cryptocurrency is the international crime currency, and how the government can regulate it to avoid tax evasion.
Going by the example of Wannacry attack, will cryptocurrency be the currency used in cybercrime?
Cryptocurrency is the only currency used in the dark web. One of the reasons for a rise in cybercrime globally is the easy settlement via cryptocurrency, which keeps both the parties anonymous. So I can safely say bitcoin or cryptocurrency is the international currency for cybercrime.
What cases of fraud have you encountered?
There are examples of fraud perpetrated by bitcoin dealers, agents and sometimes even by the exchanges. People have withdrawn cash from retirement schemes and invested for greed. I also get cases where people are cheated with Ponzi schemes where people are lured even with fake, paper-printed bitcoins and promised three-four times the returns in a short span. This happens because of so much frenzied news with no awareness among the common man.
How can governments regulate bitcoin to avoid tax evasion?
I have a long-standing suggestion to Government of India and Tax Authorities: “Make it compulsory for individuals and organizations to declare while filing tax returns, any Cryptocurrency holdings that they have”, as crypto is a commodity. This will bring money spent and invested as cryptocurrency also in the tax bracket, and black money would be curtailed. Today all Hawala traders and their second generations are heavily into bitcoins. Bitcoins are used for financing terrorism too.
What do you recommend the law enforcement to do, to avoid bitcoin fraud?
Law and Enforcement’s Economic Offences Wing need to have a Cryptocurrency Cell which has databases of bitcoin traders and exchanges. Through a spy network, the department should track trades. There are international forensic agencies which can track bitcoin trades. I say bitcoin trades are not anonymous; they are rather pseudo-anonymous, and can be tracked. Indian LEA needs training, tools, and tie-ups to unearth all illegal trades.
What do you recommend the consumers to do, to safeguard against the bitcoin fraud?
History has shown that greed is the primary reason behind financial losses. Bitcoin or Cryptocurrency schemes are no different. Today I see people who have not withdrawn cash or converted their bitcoins have burnt their cash, and in India, people buy Rs 1-2 lakh premium per bitcoin.That’s the kind of craze. I even have clients who have invested in cryptocurrency which has not even listed itself.