A Public Interest Litigation (PIL) has been filed in the Supreme Court of India which is seeking an intervention to regulate the flow of bitcoin in India and ensure that it is accountable to the exchequer. “The lack of any concrete mechanism pending the regulatory framework in said regard has left a lot of vacuum and which has resulted in total unaccountability and unregulated Bitcoin (crypto money) trading and transactions,” the petition added.
The petition was filed by advocate Dwaipayan Bhowmick and the court is seeking responses from the finance, law and justice, information and technology ministries along with the Reserve Bank of India (RBI) and Securities and Exchange Board of India (SEBI). The development was first reported by Bar & Bench. Read the petition here.
The petition said that the RBI and SEBI have been trying to shift the onus on each other for regulating bitcoins and other cryptocurrencies as there is confusion whether they would be regulated as a “currency” or a “commodity”.
In August 2017, an inter-ministerial report was submitted to the Centre by the department of economic affairs but the details of the report were not made open to the public. The committee was set up in April. However, the petition cited some parts of the report which said the following:
- Bitcoins would fall under the purview of RBI’s 1934 Act. (This suggests that the government is looking to regulate Bitcoin as a currency).
- Bitcoin investors should be taxed.
- The RBI will have to issue guidelines regarding investment and purchase of Bitcoins.
- If any foreign payment is made through Bitcoins, it would fall under the purview of Foreign Exchange Managment (FEMA) Act.
The RBI on Virtual Currencies
In 2013, 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.
In 2017, it reiterated this stand, saying: “The Reserve Bank of India had cautioned the users, holders and traders of Virtual Currencies (VCs), including Bitcoins, about the potential financial, operational, legal, customer protection and security related risks that they are exposing themselves to, vide its press release dated December 24, 2013.
The Reserve Bank of India advises that it has not given any licence/authorisation 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.