A few days ago, PTI ran a story saying that “Use of Bitcoin illegal, can attract anti-money laundering law”. It cited a response in the Rajya Sabha by the Minister of State for Finance Arjun Ram Meghwal, but interpreted the statements incorrectly. Meghwal was responding to a question from Dr KVP Ramachandra Rao, about “whether Government shares the reported comment of RBI that virtual currencies pose a financial risk; and if so, how will it address the problem while pushing for a cashless economy?”
To this, Meghwal pointed towards the position of the Reserve Bank of India “that it has not given any license / authorization to any entity / company to operate such schemes or deal with Bitcoin or any virtual currency”, and more pertinently, that “any user, holder, investor, trader, etc. dealing with Virtual Currencies will be doing so at their own risk.”
Thus Bitcoin is in that space where it is neither legal nor illegal: unregulated. The absence of a regulation doesn’t make it illegal.
MediaNama readers might recall that in 2014, the RBI had said that it would not regulate any Virtual Currency including Bitcoin in India and warned people who were dealing with the currency in India of the risks involved, saying that they’re exposing themselves to financial, legal, operational and security related risk. Since then, the RBI has been “examining the issues associated with the usage, holding and trading of VCs under the extant legal and regulatory framework of the country, including Foreign Exchange and Payment Systems laws and regulations.”
All Meghwal said was that only those who are using Bitcoin for illicit and illegal activities should worry; that the absence of counter parties in usage of virtual currencies “including Bitcoins, for illicit and illegal activities in anonymous/ pseudonymous systems could subject the users to unintentional breaches of anti-money laundering and combating the financing of terrorism (AML/CFT) laws.”
Download a copy of the Meghwal’s response here.
Meghwal had given a similar response to questions from MP Wansuk Syiem in February (download PDF), who had asked the following questions:
a) whether because of the surge in e-commerce, since demonetisation interests in Bitcoin has picked up in India which is an online currency produced using cryptography programme;
b) whether the(RBI) has not yet accorded Bitcoin currency status while China has emerged as the largest market for Bitcoins ;
c) whether there is a threat of crime syndicates involved in spreading terrorism shifting to Bitcoin if it remains unregulated; and
d) whether experts feel that Bitcoin can be regulated the way SEBI has strengthened regulations of P-notes in the capital markets?
A similar response was given by the then Finance Minister P Chidambaram in 2014, to questions from MP Chandan Mitra:
(a) whether Government has examined the issues associated with the usages, holding and trading of virtual currencies including bitcoins under the extant legal and regulatory framework of the country, if so, the details thereof;
(b) if not, the reasons therefor; and
(c) the remedial measures taken by Government in the matter keeping in view the use of these virtual currencies in money laundering, terror financing, etc.?
(Hindi translation; English Doc not available for download)
All this tells us is that it has been three years, and the answers remain the same. The RBI is still “examining” the Bitcoin situation in India.