Curious case of Bitcoin in India-No clarity on this virtual currency

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BitcoinThe Reserve Bank of India (RBI) had recently warned the traders and users of virtual currencies including Bitcoin to be very careful about their malicious effects. The apex body even said that consumers who will face the blow of such virtual currencies will not any receive any protection from the bank.

This was RBI’s third warning issued against the usage of Bitcoins in India.

With this, the existence of this otherwise popular entity across the world has again landed in a state of uncertainty. As per the President of Blockchain.com, Nicolas Cary, over 2,500 Indian Users trade cryptocurrencies every day.

Analysis of the series of guidelines issued by the regulator and the apex entities in the country deepens the confusion over the future of Bitcoins in India.

A look at the discussions so far:

Reserve Bank of India

December 24, 2013: RBI issues warning against the financial, operational, legal, customer protection and security related risks in connection to using of Bitcoins.

February 1, 2017: RBI sticks to its stance, says it has not given legal authorisation to any entity, trade or brand to operate schemes with regards to Bitcoin or any other virtual currency. It warned the traders and users of virtual currencies to use it at their own risk as the regulator will not provide them with any protection.

September 13, 2017, Sudarshan Sen, Executive Director, said, “Right now, we have a group of people who are looking at fiat cryptocurrencies. Something that is an alternative to the Indian rupee, so to speak. We are looking at that closely.”

“As regards non-fiat cryptocurrencies, I think we are not comfortable…non-fiat cryptocurrencies like Bitcoins, for example,” he added.

On December 6, 2017, RBI issued its third directive maintaining it’s warning against Bitcoin.

Central Government

After a lot of speculations, in June this year it was reported that the Central Government is considering regulating Bitcoin and thinking about granting it a legal status. The Centre even appointed a committee in this regard. However, this never materialised.

An interdisciplinary committee formed this year in April by the Union Finance, Arun Jaitley, its report submitted on August 2nd, 2017, recommended banning of all cryptocurrencies.

November 30 2017, the Union Finance Minister, Arun Jaitley said,“…As far as the Indian government’s stance is concerned, we have not given any legitimacy to cryptocurrency. Yes, we have received the report, and it is under examination.”

Supreme Court of India

November 2017: The Supreme Court of India ordered the centre to respond to a petition filed in the Court pleading to regulate the use of Bitcoin and ensure that this virtual currency is made accountable to the exchequer.

Challenges for Bitcoin in India

  • The RBI Act of 1934
  • The Foreign Exchange Management Act (FEMA) of 1999
  • The Prevention of Money Laundering Act (PMLA) of 2002

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