Bitcoin is the new sensation in the world of digital currency, with its price crossing $8000 mark; it is only legit if India should also recognise it as a legal mode of payment. With cryptocurrency like bitcoin, people can buy goods and services and make transactions without involving banks, credit card issuers or other third parties. The Supreme Court of India is waiting for a response of the Centre and the Reserve Bank of India on a PIL trying to make the flow of Bitcoin and to ensure that the same be made accountable to the exchequer.
The Public Interest Litigation (PIL) that has been filed is seeking an intervention to regulate the flow of bitcoin in India. It states that, As there is no concrete mechanism pending in the mentioned regulatory framework has left a lot of vacuum and has resulted in total unaccountability and unregulated Bitcoin trading and transactions in many parts of the country.
The petition filed by an activist, Dwaipayan Bhowmick highlights the dangers of regulating Bitcoin. In recent cyber-attacks, ‘Ransomware’ hackers held victims hostage by encrypting their data and demanding them to make payments in bitcoins to regain access to their computers. He said despite the RBI’s call for caution against the use of virtual currencies, private Bitcoin exchange have been adding over 2,500 users a day and had reached five lakh downloads.
The petition also said that the RBI and SEBI have been trying to shift the responsibilities on one another for the regulation of bitcoins and other cryptocurrencies as it is still not clear whether they would be regulated as a “commodity” or a “currency”.
The Inter-ministerial report submitted in August 2017 by the department of economic affairs to the Centre, is not made open to the public. However, the petition highlighted some parts of that report in it.
- Bitcoins would fall under the RBI’s 1934 Act which suggests that the government is planning to regulate Bitcoin as a legal currency.
- Bitcoin investors will have to pay taxes.
The RBI will issue guidelines regarding investment and purchase of Bitcoins.
If there are any international payments made through Bitcoins, it will come under the legality of FEMA, Foreign Exchange Management Act.
In 2013, the RBI declared that it would not regulate any Virtual Currency which also includes Bitcoin, in India. RBI even the citizens who were dealing with cryptocurrency in India of the risks involved, saying that they’re making themselves vulnerable to financial, legal, operational and security-related risk or attack.
In 2017 also, RBI still held its ground, by saying: “The users, holders and traders of virtual currency are always at constant risk by exposing themselves with bitcoins. The Reserve Bank of India advises that it has not given any licence to any entity/company to operate such schemes or deal with Bitcoin or any virtual currency. As such, any user, holder, investor, trader, etc. dealing with Virtual Currencies will be doing so at their own risk.”
Meanwhile, the petition also quoted RBI executive director Sudarshan Sen: “Right now, we have a group of people who are looking at fiat cryptocurrencies. As regards to non-fiat cryptocurrencies like Bitcoins, think we are not comfortable with them”. Fiat currency is legal tender whose value is backed by the government that issued it.