The row of legalizing cryptocurrencies in India has deepened recently. The Reserve Bank of India (RBI) has clarified the Supreme Court of India that cryptocurrencies are not valid ‘currency’ or ‘money’ under the existing legal frame, in a counter affidavit filed in response to petitions led by Sidharth Dalmia and Dwaipayan Bhowmik.
RBI also added that virtual currency cannot even be validated as a ‘payment system’ because it does not include a service provider.
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It is submitted that crypto-currencies fall short of being true currencies. It is further submitted that RBI does not consider virtual currencies such as Bitcoins as ‘currency’ under the extant laws. There are no enabling provisions under the extant law to treat Bitcoin as a currency,”
stated, the affidavit filed in Supreme Court. “
Thus, legally it may not be possible to notify Bitcoins as currency for the purpose of FEMA...Since Bitcoins and other VCs are not in the physical form and neither expressed or drawn in Indian rupees, the definition of ‘Indian currency’ cannot be made applicable to Bitcoins.”
Not only this but Bitcoins and Virtual Currencies cannot be considered as foreign currency since they are not circulated by any sovereign state, maintained RBI.
On the applicability of "The Payment and Settlement System Act", the RBI answered that VCs are defined neither as money nor as currency, so this law cannot cover the crypto-transactions. “Therefore, the question of RBI declaring them as legal or illegal does not arise,”
Since 2013 RBI has made many press releases, warning users, and traders of VCs, of the potential risks that they are exposing themselves.
The matter of legalizing Crypto-currency will have inference on the role and responsibilities of other regulatory and enforcement agencies as well and therefore the “RBI cannot unilaterally decide for the Government, on the legality of Bitcoins”
RBI also maintained that an Inter-Disciplinary Committee was made by the Union Finance Ministry, in March 2017, and the RBI is now waiting for the Government to accept its recommendations and delineate the roles and responsibilities. Meanwhile, another Committee has been constituted by the Department of Economic Affairs to propose specific actions relating to VCs.
Further hearing of the matter is now expected on September 17, before a bench headed by Justice Rohinton F Nariman.
Well, this looks like the cryptocurrencies have a long path full of hurdles to get recognition in the quite large economy of India.