The much awaited public advisory by the Reserve Bank
of India (RBI) regarding the legality
of Bitcoins in India has been finally
released. As per the press release, RBI
cautioned users of virtual currencies against risks of use
of Bitcoins in India. The advisory of RBI is in conformity with the
views
expressed by Perry4Law
so far.
RBI has warned 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.
According to RBI the creation, trading or usage of
VCs including Bitcoins, as a medium for payment are not authorised by
any central bank or monetary authority. No regulatory approvals,
registration or authorisation is stated to have been obtained by the
entities concerned for carrying on such activities. As such, they may
pose several risks to their users.
RBI also observed that there have been several media
reports of the usage of VCs, including Bitcoins, for
illicit
and illegal activities in several jurisdictions. The
absence of information of counterparties in such peer-to-peer
anonymous/ pseudonymous systems could subject the users to
unintentional breaches of anti-money laundering and combating the
financing of terrorism (AML/CFT) laws.
In other words, RBI has said that Bitcoins users and
stakeholders are exposing themselves to a wide variety of risks,
including the legal risks, while dealing in Bitcoins.
According to Praveen Dalal, leading techno legal
expert of Asia and managing partner of ICT law firm Perry4Law, “The
dealing in Bitcoins in India is still A “Grey Area” and it is not
safe to consider it “Strictly Legal”. Till the time Indian
Government or other Regulatory Authorities of India make use and
dealing of Bitcoins Legal in India, the use of the same in India is
at the own “Legal Risk” of concerned person or Institution”.
It is legally wrong to assume that dealings in
Bitcoins in India if strictly legal as individuals and companies have
to take care of the cyber
law due diligence and Internet
intermediary rules compliances. For instance, a platform
selling and purchasing or trading in Bitcoins must not only comply
with the provisions of Information Technology Act, 2000 but also with
laws applicable to online trading and income tax.
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. The net result of the advisory by RBI is that it has
made the position of Bitcoins in India legally risky i.e. unless laws
of India are duly complied with, dealings of Bitcoins in India could
be punishable under Indian laws.
