India: Transfer Of Cryptocurrency On Wallets Of Other Persons And The Trap Of Benami Law

Last Updated: 13 August 2019
Article by Vijay Pal Dalmia, Partner and Rajat Jain

BY Vijay Pal Dalmia, Advocate
Supreme Court of India & Delhi High Court
Email id: Mobile No.: +91 9810081079
Facebook: Twitter: @vpdalmia
And Rajat Jain, Advocate
Email id:
Mobile No. 9953887311

Pursuant to a Public Interest Litigation titled Siddharth Dalmia & Vijay Pal Dalmia Vs. Union of India, Ministry of Home Affairs, Ministry of Finance & Reserve Bank of India being W.P.(C) No. 001071 / 2017 before the Supreme Court of India, the Government of India has recently cleared its stance to completely ban the activities relating to mining, generating, holding, selling, dealing in, issuing, transferring, or use of the Cryptocurrency in the territory of India, and has prepared a bill, i.e., Banning of Cryptocurrency and Regulation of Official Digital Currency Bill, 2019 (hereinafter also referred as "Bill"), which is likely to be presented in the next session (November-December 2019) of the Parliament of India. This Bill is a result of the Committee appointed by the Department of Economic Affairs, Ministry of Finance New Delhi, India, had the mandate to study and recommend the policy and legal framework for the regulation of virtual currencies. to propose specific actions to be taken in relation to Virtual Currencies. The Committee report is titled as "Report of the Committee to propose specific actions to be taken in relation to Virtual Currencies" and is available from the following link: As the Government of India has cleared its intention to ban all the activities relating to cryptocurrency, there is a considerable panic amongst the cryptocurrency holders in India.

The Bill not only bans activities relating to cryptocurrency but also prescribes imprisonment up to 10 years and steep fines. Due to such stern stance taken by the Government of India, the cryptocurrency holders are frantically involved in selling / planning to sell their cryptocurrencies and book losses. Alternatively, cryptocurrency holders are looking to enter into an arrangement with their friends or relatives, who are settled abroad and have accounts on crypto wallets, who can hold their cryptocurrencies in their crypto wallets for their future benefit.

Though the Bill prohibits any direct or indirect holding of the cryptocurrency, however, the said restriction will only come into force only if the said Bill gets the nod of both the houses of the Parliament, i.e., Lok Sabha and Rajya Sabha, and the assent of the President of India. So, at this juncture, the cryptocurrency holders/ investors who are transferring their cryptocurrencies to the international crypto wallets of the third parties, will not be affected by the said prohibition. This aspect about the legality of cryptocurrency holdings will also depend on the prospective or retrospective applicability of the proposed Act.

However, such transfer of the cryptocurrencies to the international crypto wallets of the third parties, for their future benefit may fall under the ambit of the Benami Transactions (Prohibition) Amendment Act, 2016 which is also be called as Prohibition of Benami Property Transactions Act, 1988 (hereinafter also referred as "Benami Act").

Under Section 1 (9) of the Benami Act, the term "Benami Transaction" has been defined as under:

  • A Benami Transaction means,-
    1. A transaction or an arrangement-
      • where a property
        • is transferred to, or is held by, a person,
        • and
        • the consideration for such property has been provided, or paid by, another person;
      • and
      • the property is held for the immediate or future benefit, direct or indirect, of the person who has provided the consideration,
      • except when the property is held by-
        1. a Karta or a member of an undivided Hindu family..........;
        2. a person standing in a fiduciary capacity for the benefit of another person towards whom he stands in such capacity.........;
        3. any person being an individual in the name of his spouse or child ............;
        4. any person in the name of his brother or sister or lineal ascendant or descendant........; or
    2. a transaction or an arrangement in respect of a property carried out or made in a fictitious name; or
    3. a transaction or an arrangement in respect of a property where the owner of the property is not aware of, or, denies knowledge of, such ownership; or
    4. a transaction or an arrangement in respect of a property where the person providing the consideration is not traceable or is fictitious.

Under Section 1 (26) of the Benami Act, the term "property " has been defined as under:

"property" means assets of any kind,

  • whether movable or immovable,
  • tangible or intangible,
  • corporeal or incorporeal
  • and
    • includes any right or interest or legal documents or instruments evidencing title to or interest in the property
    • and
    • where the property is capable of conversion into some other form, then the property in the converted form and also includes the proceeds from the property.

The definition of property given under the Benami Act is quite wide to include cryptocurrency under its ambit.

Now, let us analyze the scenario of the transfer of the cryptocurrencies to the international crypto wallets of the third parties, for their future benefit by the Indian nationals in light of the provision of Section 1 (9) (A) of the Benami Act.

Let us take an example. Person X in India has 1 Bitcoin on Indian wallet which he purchased through a legitimate source. Now, Person X has transferred that 1 Bitcoin to the wallet of Person Y, who is a resident of the USA, for holding that Bitcoin on behalf of the Person X and his future benefit.

From a plain reading of Section 1 (9) (A) of the Benami Act, it seems that the above example transaction will fall under the scope of Benami Transaction, as the Bitcoin is transferred by Person X to Person Y, and the Bitcoin is held by Person Y in his wallet, for the immediate or future benefit of the Person X, who has provided the consideration for such property. Such activities fulfill all the tenets of Section 1 (9) (A) of the Benami Act and also do not fall under any of the exception provided therein.

The Benami Act is an Indian statute and only extends to the territory of India, due to which the property (1 Bitcoin) cannot be attached or confiscated; however, the prosecution of the Person X cannot be ruled out under the Benami Act though it seems farfetched.

From the above analysis, it is apparent that any person who is transferring his cryptocurrency to the wallet of any other person, for his own immediate or future benefit, can fall under the trap of Benami Act.

© 2018, Vaish Associates Advocates,
All rights reserved
Advocates, 1st & 11th Floors, Mohan Dev Building 13, Tolstoy Marg New Delhi-110001 (India).

The content of this article is intended to provide a general guide to the subject matter. Specialist professional advice should be sought about your specific circumstances. The views expressed in this article are solely of the authors of this article.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions