An Indian who lives in Canada, has sent a legal letter to the Reserve Bank of India (RBI) seeking clarification on its stance against virtual currencies such as Bitcoin. In the letter, Venugopal Badarawada threatens to approach the court if the bank fails to act within a month. He has asked the RBI to come up with a clear policy framework for regulating crypto currencies in India within a reasonable time, by immediately setting up a committee of experts from relevant fields such as information technology, finance law, economics, foreign trade and exchange etc.
On RBI press release: In the letter addressed to RBI Governor, Badarawada says that the press release issued by RBI in December creates uncertainty and fear for anyone who wants to have a stake in the virtual currency ecosystem. In the press release, RBI had warned the public against the use of virtual currencies by saying that users are subjected to unintentional breaches of laws against money laundering and financing of terrorism.
How is it illegal? Badarawada points out that the RBI has not made any statement whatsoever explaining under which provision of law the usage of a virtual currency is illegal. There is also a serious concern as to what aspects of FEMA apply to buying and selling of virtual currencies.
Currency or commodity? Badarawada has asked the RBI about how it plans to treat virtual currency – as a foreign currency, domestic currency, private currency, commodity, software program or as an electronic document? He also has reservations on whether RBI has the power to regulate virtual currencies and if so, under what law. To make his point he says that, mining of virtual currency is happening around the globe. “If these mining activities are considered to be an industrial activity or a software development activity, RBI has to take measures to regulate these activities on par with what is applicable for similar activities,” he says in the letter.
Need detailed analysis: Due to the vast number of loopholes in the subject, he asks the central bank to release a detailed analysis of the subject coupled with a set of rules and regulations to clarify the ambiguity which exists in the minds of general public. “Merely raiding a couple of entities and releasing vague press statements in public without any kind of sanctions whatsoever does not throw any light on the subject. In fact, your actions which are being taken in this regard are creating more confusion among the public and you have now chose to remain silent,” the letter says.
Medianama take It should be interesting to see how RBI responds to this. If they don’t, Badarawada plans to approach the court for clarity, which reminds us of this instance when an online card gaming website wanted to find out about the legality of conducting card games online with real money. One court said it was illegal and another said it was legal, so what’s happening now is that there is no absolute certainty on whether it is allowed in India or not.
That being the case, it does not make a lot of sense to approach a court seeking clarity on an issue where pretty much no law exists. It would be best for everyone involved if RBI could make its stance clear on the issue. If the RBI can decide what Bitcoin needs to be treated as – currency, commodity, software or an electronic document – building laws for it become slightly simpler.
Virtual currencies are not always the big, bad wolf the RBI portrays it to be. Earlier today, an Indian Olympian Shiva Keshavan, was able to raise funds for his participation in Sochi winter Olympics from the Dogecoin community. We have heard of several instances where software developers were offered payments in virtual currency.
RBI should work on formulating a nuanced law, rather than simply pointing out how it can be used for moving black money and funding terrorism. The possibility of any financial medium being misused exists, but RBI needs to keep in mind that virtual currencies are trackable, even if a central bank can’t regulate it. So like we mentioned earlier, they need to figure out how to get involved in the ecosystem instead of making a lot of legitimate businesses and entrepreneurs look like criminals for no reason.