In this opinion piece, Mohammed Danish, a lawyer practising at High Court of Delhi, explains how the interest of the crypto investor in protected under Indian law despite the absence of any crypto regulatory regime. The investor can still approach the court of law against any deficiency in service by the cryptocurrency exchange. You can follow the author on twitter @cryptokanoon and direct your queries at firstname.lastname@example.org.
The Indian crypto ecosystem has come across a series of shaking events in the recent past which have caused the investors to re-evaluate their decision of investing their hard earned money into the uncertain yet lucrative sector of cryptocurrency. The Indian Government, through RBI, has partially disclosed its mind on the legal prospect of Crypto by proclaiming that the banks shall not provide services to crypto players. The notification by RBI acted as a massive jolt to the fast-growing Crypto market in India.
Before the dust could settle properly, news emerged of the country’s biggest theft of Bitcoins from a well-known crypto exchange i.e., Coinsecure. In the complaint made to cyber crime cell, the exchange alleged a role of its own Chief Strategy Officer in the theft which caused a loss of around 438 bitcoins worth Rs. 19 Crores ($3 million). Ironically, the purported ground on which the RBI had supported its crackdown on crypto trading was inter alia, consumer protection. And the immediate occurrence of the Coinsecure insider job seemed to have proven the fear of the State about consumer protection, even though the exchange has proposed a repayment plan for the investors who have lost their bitcoins.
The sequence of the aforesaid adversities cultivated a climate of fear in the minds of investors raising serious doubts on the future of cryptocurrency in India more so because of the continued haze on the legal canvas of the country. Above all, it stirred up a debate among the masses about ‘what is the legal recourse?’ on the probable disputes which are inevitable and unavoidable in any ecosystem which involves commercial transactions.
Legal validity of the Contract between Investor and Crypto Exchange
As per the Indian Contract Act, 1872, any contract which is entered into by two competent(Major, Sound mind and not barred by any law to enter into contract) persons (Legal or Natural) out of their free will, for a lawful object, supported by a lawful consideration and not expressly declared void by the law, is a legally valid contract. Since in the case of cryptocurrency services, contracts are formed through electronic means and therefore with a view to validate e-contracts, Section 10A of the Information technology Act, 2000 reinforces the validity of the contracts so made on electronic devices.
When an investor clicks on ‘I accept’ option in the cryptocurrency wallet, he indicates his acceptance to the terms of a contract offered by the service provider/exchange. The cryptocurrency exchanges provide its platform ‘services’ for the buying and selling of cryptocurrencies through mobile applications etc. for which the exchanges charge consideration in the form of transaction fee. Since no law in India prohibits the buying and selling of cryptocurrency, therefore the said investor-exchange contract is a legally valid one as long as it fulfills other essential ingredients of a contract as mentioned above.