FDI and Cryptocurrencies in India

The FDI is regulated under FEMA Act. The FDI Policy and TISPRO, made under FEMA, regulate FDI in Indian entities. The Exchange would be regulated either as Non-banking finance and asset management companies or E-commerce platforms which allows 100% foreign investment without approval from the government. But if they are deemed as commodities, the FDI would be restricted to 49%.[1]

The relevant provisions for reaching the conclusions are as follows:

Subject to provisions of FDI Policy, e-commerce entities would engage only in Business to Business (B2B) e-commerce and not in Business to Consumer (B2C) e-commerce.
E-commerce means buying and selling of goods and services including digital products over digital & electronic network.[2]

Subject to our discussion before, we concluded that the cryptocurrencies could be deemed to be ‘goods’ and hence would come under the ambit of e-commerce websites. Even if they are deemed to be digital assets, the definition is wide enough to bring cryptocurrencies under it’s ambit.