Cryptocurrency and blockchain technology has been around for many years. However, these still happen to be ‘new terms’ for many people worldwide. While Bitcoin was first introduced in 2009, its popularity has escalated only recently. Ever since a multitude of new cryptocurrencies has been created worldwide.
Cryptocurrency, simply put, is a decentralised virtual or digital currency. It uses encryptions to verify transactions between users via coding. The coding makes it highly secure and reduces the probability of counterfeiting down to a minimum. One of the most enticing factors about crypto that keeps investors hooked is the probability of making huge profits in a concise amount of time.
Some of the most famous cryptocurrencies include Bitcoin, Ethereum, Dogecoin, etc. While Indian investors are involved in crypto trading, no laws directly acknowledge or regulate cryptocurrency presently. However, as India is moving towards recognising and developing a digital currency, various issues, including ownership, legal protection of crypto, etc., might arise soon.
The Cryptocurrency Saga in India
There is no concrete legal framework that regulates the use of cryptocurrency in India. It continues to be a grey area. In 2017, the Reserve Bank of India had clearly stated that cryptocurrencies (or any virtual currencies at large) were not considered legal in India. Although the RBI did not put any complete ban on cryptocurrency usage, the use was also not authorised. Hence crypto investors were left to fend for themselves.
RBI Ban on Cryptocurrency
In 2018, the Reserve Bank of India imposed a blanket ban on the use of cryptocurrencies. The RBI prohibited banks or other financial institutions from using virtual currencies in their transactions and from felicitating such transactions. This step had caused great havoc and confusion in the market. Confused investors rapidly withdrew money, causing the market to crash.
Fast forward to 2020, in the case of Internet and Mobile Association of India v. Reserve Bank of India, the Supreme Court of India lifted this blanket ban, and investors much appreciated the decision.
The Union Budget 2022-23
The status of cryptocurrencies stands further clarified via Budget 2022. Union Finance Minister of India, Nirmala Sitharaman, clarified that India would soon launch its digital currency using blockchain technology. This step will make India one of the few countries worldwide to have its own digital currency. Additionally, virtual assets were also given recognition during the sessions, along with the discussions on the taxability of virtual or digital assets.
Considering this history that cryptocurrency has witnessed in India, it is safe to assume that the future of virtual currencies is likely to be bright and optimistic, much to the apprehension of crypto investors. Nevertheless, the indisputable fact remains that our country does not have any precise or concrete legal framework that directs or regulates the use of these virtual currencies or protects the rights of crypto investors.
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Analysing the Scope of Extending IP Protection to Cryptocurrencies and Crypto Based Assets
The future of crypto in India is becoming less and less uncertain by the day. The upward trajectory of the government’s decreasing reluctance to recognise crypto and blockchain-based assets and the euphoric adoption of it all by the general populous of India underlines this. Furthermore, as the use of virtual currencies and assets increases, there is a likelihood that start-ups, companies, corporations, and creators at large would want to protect their version of digital assets and currencies by way of intellectual property rights.
An Intellectual Property is an asset created by virtue of the human intellect of the creator. Numerous IP protection methods have been designed to protect the rights of such creators from the likelihood of IP infringement.
Blockchain vs Cryptocurrency
The uses of blockchain and crypto-based assets and currencies are increasing. The former has made its way into many IP-intensive sectors, including pharmaceuticals, the automotive industry, etc. The reason behind the same is that blockchain technology creates a secure and time-stamped entry. So using it for brand protection, registering financial transactions, saving designs, documents, etc. is the aptest choice as it makes the transactions immutable.
Talking specifically about cryptocurrencies, one can deduce the importance of extending IP protection to these currencies by observing the trademark battle that erupted over the name ‘Dogecoin’.
Dogecoin happens to be a cryptocurrency that was created casually like any other virtual currency. It ultimately landed up becoming a crucial part of crypto stardom. However, the Dogecoin Foundation, the original currency creator, did not trademark the name. This led to a flood of other currencies mimicking the name, like Baby DogeCoin and Dogelon Mars, for instance. On the other hand, Bitcoin was not trademarked or patented with the rationale that imposing IP protection on the cryptocurrency would limit its growth and use.
The rationale behind both these instances is entirely different. However, a complete negation of the need of having IP protection as an option is impossible.
Potential Complications in Implementing IP Regime to Cryptocurrencies
- Applicability of Patent Laws- The patentability of cryptocurrencies is a rather complex issue. This is because the creation of new cryptocurrencies is not seen as a new invention since it uses the same technology. The case of Alice Corp. v. CSL Bank Int’l gave the litmus test for such perplexing situations. The creation or invention, concerning this case, should provide a concrete solution to a problem that is real rather than being abstract. There is no new invention in the case of virtual assets and ledgers. Instead, it reuses the basic abstract concept.
- IP Protection might Limit Open Sourcing– Many experts also believe that cryptocurrencies are self-policing in nature. Based on the same rationale behind not patenting Bitcoin, excluding cryptocurrencies from the ambit of IP protection provides them ample opportunity to grow and morph according to the needs of the market and investors. Moreover, because cryptocurrencies are open source, this allows users to make their own virtual currencies as well. This is a must for the growth of crypto by many.
- Jurisdictional Complexity- Even though the use of cryptocurrencies is geographically boundless, the jurisdictional aspects need to be analysed to settle disputes that might arise. A competent court is provided with the jurisdiction to adjudicate cases. Numerous factors, including place of the dispute, nationality of parties, nationality of the creator of said cryptocurrency etc., need to be acknowledged to decide the jurisdictional aspects of cryptocurrencies.
- Lack of Awareness in General– Additionally, there is a lack of awareness in general about crypto-based assets and currencies at large. Since India plans to introduce its own digital currency, it is essential to make people aware of the working mechanisms of digital currencies. They should also know their rights and remedies in case of infringement of a right.
Conclusion- The Road Ahead
The potential challenges that will come in the way of extending IP protection are not exhaustive in nature.
Seeing the evolution and accelerating dependence of people upon digital platforms, the introduction of digital currencies all around the world does not seem to be a far-fetched idea, which makes it even more necessary to provide clarity on ways to protect cryptocurrencies, so that the creators know how to combat infringement related issues that might arise as a result of extensive use of cryptocurrencies and blockchain-based assets at large.
About the author
Nikita has a penchant for reading and writing, and naturally, she is a research enthusiast. Being a law student with specialisation in International Trade and Investment Law, her interest areas include Intellectual Property Law, Cyber Law, and International Law. She has written various articles and research papers about global issues related to IPRs and Cyber laws with the aim of acknowledging these issues, addressing potential solutions, and spreading awareness about the same.