There is no doubt that the era of information and communication technology has introduced many opportunities in several aspects. One of the areas that could benefit from the advent of technology is the financial and business sector.
An increasing number of online users have activated the concepts of virtual worlds. Thus, new and updated types of trade, transactions and currencies are being introduced in the market at an increasing rate. One such notable digital payment system that has emerged in the past few years is cryptocurrency.
Cryptocurrency can be defined as a medium of payment wherein the currency is created using cryptographic techniques. Cryptocurrencies represent valuable and intangible goods that can be used electronically or virtually in various applications and networks such as online social networks, online social games, virtual worlds, and peer-to-peer networks.
The entire system of cryptocurrency functions through blockchain technology. A blockchain is a distributed database that is spread across several nodes in a computer network. Blockchain is a decentralized database that saves information. A blockchain’s data structure varies from a regular database as blockchain divides data into blocks, each one holds a collection of information.
Blockchain plays a crucial role in cryptocurrency as it offers enormous promise in a variety of industries, including banking, supply chain, healthcare, retail, travel, and so on. Consequently, the interplay between blockchain technology, cryptocurrency and Intellectual Property (IP) law is experiencing exponential growth.
IP PROTECTION FOR CRYPTOCURRENCY
With the rise in the use of cryptocurrency, experts are wondering if the technology’s explosive growth will eventually be hindered by the IP protection such as copyright, patent, or trademark; specifically, cryptocurrencies associated with them.
There has always been a great deal of tension between innovation and the role of legal protection provided by IP law. While both opponents and proponents of IP law can see how intellectual property law can either encourage or stifle innovation, depending on the situation, it is important to understand that modern IP law has not yet really been used in the blockchain technology.
Intellectual Property Rights (IPR) and cryptocurrency are inextricably linked. With the globe preparing to utilize blockchain to tap into previously untapped potentials in a variety of sectors, IP shall play an important role in the future.
Blockchain technology’s reliability and security could be used to fortify every step of the IP rights life cycle, such as resolving ownership disputes, creating licensing agreements via blockchain contracts, detecting counterfeit products, or simply creating an IP record for registering and keeping track of all types of IP rights.
Providing IP protection pertaining to cryptocurrencies is difficult as determination of ownership of cryptocurrencies is uncertain. For instance, the basis of trademark law is to enable the trademark owner to use the mark only for its products and to prevent infringement of such trademark. This concept can be difficult to apply to cryptocurrency because the founders of the blockchain are unknown, and the technology is based on completely anonymous and interference-free transactions.
A cryptocurrency may not qualify as a product or service if its only function is merely as a medium of exchange, such as a traditional currency. However, a good or service associated with a function may enable the name of the cryptocurrency to be trademarked.
For example, descriptions of goods and services included in registered trademarks associated with cryptocurrencies are instructive. Applicants should consider goods and services associated with a cryptocurrency when applying for a trademark.
Therefore, it would be difficult for an individual or entity to claim ownership of the cryptocurrency. Registration of blockchain as a trademark has been widely opposed as many believe that blockchain is a technology and not a trademark. Blockchain is something that everyone around the world can freely use, and thus, cannot be owned by any particular entity.
In the event of acquiring trademark protection for a blockchain, a potential bottleneck can be that the mark must identify the source of the goods or services associated with the mark, which is difficult to determine in case of blockchain technology. In the backdrop of the same, it is important to avoid using a cryptocurrency name in a generic manner to prevent the name from falling into the public domain.
The blockchain does not perform an initial inspection on the original data submitted; it merely ensures that the data has not been tampered with or changed. Furthermore, since the block chain technology is immutable, it is difficult to correct an entry after it has been created. Hence, cumulatively, the aforementioned conditions result in uncertainty pertaining to obtaining IP protection for cryptocurrency or blockchain.
LEGALITY OF CRYPTOCURRENCY
On April 6, 2018, the Reserve Bank of India (RBI) issued a circular stating that the entities regulated by the RBI shall not be allowed to deal in cryptocurrencies as there are serious threat to consumer protection, market integrity and money laundering.
On the contrary, the Supreme Court had favoured virtual currencies and have discussed the same in the case of Internet and Mobile Association of India v. Reserve Bank of India [2020 (2) CTC 528]. The Supreme Court observed that cryptocurrency can be accepted as a form of payment for the purchase of goods and services and should be regulated by the RBI.
The Supreme Court also held that instead of banning these virtual currencies, RBI should look for different ways which could be beneficial to the virtual currency users by implementing appropriate regulations.
RBI intends to introduce the “Cryptocurrency and Regulation of Official Digital Currency Bill, 2021”, which seeks to regulate all private cryptocurrencies and create a regulatory framework for the launch of an “official digital currency”. The Government also plans to introduce a Central Bank-backed digital currency, which will be less volatile than other virtual currencies.
The Government has stated that virtual currencies cannot be considered as fiat currency as it is not stable and therefore, the Government may introduce its own virtual currency. While it is not exactly clear what should be treated as private currencies and amongst them which will be banned, the RBI has cautioned the citizens about the misuse of cryptocurrencies and the possible implications arising thereof.
Cryptocurrencies offer a new, effective, and attractive model of payment methods that companies can promote and generate revenue. It also provides an alternative mode of payment apart from traditional money, which enables users to easily perform financial activities such as buying, selling, transferring, and exchanging.
Although cryptocurrency platforms open multiple channels for digital financial transactions and provide a new currency with different mechanisms and methods, they are not controlled and regulated. The research analysed cryptocurrency platforms and extracted several concerns and challenges which are such as the financial system is at risk, lack of laws is considered the main concern in cryptocurrency.
Cryptocurrency has great potential to be next currency platform, due to the large amount of cryptocurrency flowing in different systems and the vast expansion and growth of opportunities that cryptocurrency system offers. Unless cryptocurrency is well regulated, users need to take extra precautions with such use of virtual money.
In today’s globalized society, where the internet connects the world, the necessity to properly impose IP laws grows. Blockchain is one such revolutionary technology that might aggravate IP infringement. On a concluding note, as cryptocurrency remains unregulated, it is of utmost importance to be vigilant about one’s own IP rights and to safeguard them.
-Team AMLEGALS assisted by Ms. Kritika Pandey and Mr. Amitosh Dubey (Interns)
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