A Canadian resident Venugopal Badarawada has sent a notice to RBI seeking clarifications on RBI’s stand on Bitcoins, and opened a window of opportunity for RBI to come out with a clarification on its stand on Bitcons.
The earlier press release warned the public of the possible consequences of violation of law as well as the financial risks involved in dealing with Bitcoins. The warning given to public was in order since it is the duty of RBI to keep the public warned of such risks.
However while releasing the advisory, RBI also stated that they may review the regulatory structure by saying
“The Reserve Bank has also stated that it is presently 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.”
It is the uncertainty that RBI has introduced through these lines that has invited the action of Mr Venugopal.
The undersigned has already clarified that at this point of time, Bitcoin is an “Electronic Document” as per Information Technology Act 2000/8 (ITA 2008) and hence carries “Legal Recognition”. If this “Legal Recognition” has to be removed, it would be necessary to amend ITA 2008. It is in this context that the undersigned has stated that RBI has no rights to ban Bitcoins.
This “Legal Recognition” of Bitcoins as per Section 4 of ITA 2008 makes it an “electronic document” which can be produced as evidence in a Court of law to whatever it represents. Whether this electronic document is a “Currency” or a “Commodity” or a “Derivative” is left to the community to decide based on their perception on its usage. For want of a better description, it is better to consider Bitcoin (as in deed any Crypto Currency) as a “Commodity in electronic form which the public may use for any legal purpose”. No other conclusion is logical.
It is true that Bitcoins can be used for money laundering and so is any other currency or commodity. If RBI is concerned about money laundering usage of Bitcoins, it has to stop at giving such an advisory and say that Bitcoin is otherwise not illegal to mine, possess and transact.
RBI’s vagueness is detrimental to the constitutional right of an individual in India to carry on a business of his choice. If he wants to do business with Bitcoins, he has to presently live under the constant fear that RBI may at any time change the regulation and more so with retrospective effect and render him a criminal ab-initio. Hence RBI’s silence cannot be considered acceptable.
Since there is no other way that the public can force RBI into giving a clarification, Venugopal has rightly declared his intention to approach a Court to direct RBI to clarify.
In case RBI now comes up with a view that Bitcoin is illegal, it has to state the ground under which it is considered illegal. Merely the fact that the commodity is used by some as “Virtual Currency” may or may not be considered as sufficient ground to ban it. If however RBI takes such a stand the Courts can be moved to clarify if RBI is right. It is only when the Supreme Court gives its clarification on the matter that the issue would be settled.
Let’s wait for the RBI’s reply and further action that M Venugopal contemplates.
Updated on 3rd Feb: Reference in ET