Bitcoin In India

Crypto usage in India is quite small compared to the rest of the world, but the community is growing according to exchange Zebpay, which revealed in May last year that more than 2,500 users were joining each day.

India’s crypto community is also hellbent on keeping the movement alive, in an attempt to put India on the map of leading fintech nations.

The bitcoin boom in India has not gone unnoticed by the country’s biggest banks, who are now cracking down on the cryptocurrency. But what is the legal status of bitcoin in India?

Bitcoin’s roaring success towards the end of 2017 proved irresistible to Indian investors, despite rumors that India’s central bank could put a stop to the token.

At the moment bitcoin has not been outlawed or banned, but India’s major financial institutions do not recognize it as legal tender.

India’s complicated relationship with bitcoin is all the more bizarre because neither the Government nor the Reserve Bank of India (RBI) have officially clamped down on it, but have approached it with a palpable degree of hostility.

All the while individual bitcoin traders and exchanges appear to be bearing the brunt of a campaign that has already begun to impact crypto usage across the country.

The price of bitcoins has been rising continuously for some time now. The price of cryptocurrency has surged rapidly, trespassing several thresholds one after the other. First it surged past $5,000, then $10,000, followed by $17,000 before touching $17,900 on Friday. Notwithstanding the skeptics' warnings on the legitimacy and the future of bitcoins, the cryptocurrency traders have been soaking in the bitcoin euphoria by infusing capital. The rally got a shot in the arm when Cboe announced that the exchange would commence trading in the digital currency's futures starting December 10. It followed by a similar announcement by the CME Group.

However, the Indian regulators, starting from the Reserve Bank (RBI) to finance ministry, have been extremely cautious in appraising the investors of the perils of investing money in bitcoins, among other digital currencies.

Even with no regulation in place yet, crypto exchanges across India have broken the silence to reveal the threat of regulation was enough to hamstring deposits and withdrawals.

The exchange explained its decision in a blog post: “In the past few days, many of our users have faced difficulties with INR withdrawals on Koinex.

“A tussle between our payment service partner and their bank has caused an indefinite delay in the settlement of a large portion of deposits to Koinex in the past two weeks.

“In these circumstances, we were constrained to temporarily suspend INR withdrawals, until the differences between the payment service provider and their bank are resolved.”

A lawyer working with a handful of Indian crypto exchanges told Quartz that informal pressure from RBI was influencing other banks to crack down on bitcoin.

The Indian Government faced mounting pressure in 2017 after the Indian Supreme Court called for the digital token to be regulated.

Finance Minister Arun Jaitley then set the Government’s stance in stone after he told a conference that bitcoin is not recognized as legal tender.

1. On December 24, 2013, the Reserve Bank of India (RBI) cautioned the users, holders, and traders of virtual currencies, including bitcoins, about the potential risks that they are exposed to.

"The creation, trading or usage of (virtual currencies) VCs including Bitcoins, as a medium for payment are not authorized by any central bank or monetary authority. No regulatory approvals, registration or authorization is stated to have been obtained by the entities concerned for carrying on such activities," the RBI had said in a press release issued in the 2013-end.

2. The RBI had stated five major risks of trading in bitcoins. The first is the fact that digital currencies, being in electronic format, are prone to losses arising out of hacking, loss of password etc. The second risk is the lack of any authorized central agency to regulate the payments or to turn to for redressal of grievances. The third is that there is no underlying of an asset for VCs, making the value a matter of speculation. Fourth is that the exchanges are located in various parts of the world, making the law enforcement a tricky thing for the multiple jurisdictions available. Fifth is that trading may subject the user to illicit and illegal activities since the VCs, can easily be used for illegal activities anonymously.

3. On February 1, 2017, the central bank again reminded the users of risk involved in bitcoin trading. "The Reserve Bank of India advises that it has not given any license/authorization 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," said RBI in the released early this year.

4. On December 5, 2017, the RBI reiterated its warnings in wake of a significant spurt in the valuation of bitcoins. "Attention of members of the public is drawn cautioning users, holders and traders of Virtual Currencies (VCs) including Bitcoins regarding the potential economic, financial, operational, legal, customer protection and security related risks associated in dealing with such VCs," said the RBI.

5. On March 15 this year, the finance ministry had constituted an inter-disciplinary committee chaired by Special Secretary in Department of Economic Affairs to take stock of the present status of VCs both in India and globally and suggest measures for dealing with such currencies. The committee comprises nine members including representatives of RBI, SBI, NITI Aayog and Department of Financial Services.

6. In May this year, the government sought public views on future of bitcoins. Government's official platform MyGov had asked, "Whether Virtual Currencies (VCs) should be banned, regulated or observed?" The comments could be posted before May 31. Nearly 4,000 submissions were made to the government's queries.

7. On June 27 this year, Arun Jaitley held a meeting to examine risks related to virtual currencies (VCs) such as bitcoins. Although several issues concerning bitcoins were discussed, no concrete decision was taken. The meeting was attended by IT minister Ravi Shankar Prasad, NITI Aayog (then) vice chairman Arvind Panagariya, and other senior officials.

8. In the first week of August this year, the interdisciplinary committee submitted its report to the finance minister Arun Jaitley.

9. On the future of cryptocurrencies, finance minister Arun Jaitley on November 30 said that recommendations are being worked at. "The government's position is clear, we don't recognize this as legal currency as of now," Jaitley said when asked whether the government has taken any decision on cryptocurrency.

10. Income Tax (I-T) department mulls taxing the gains made by bitcoin traders and investors as it conducted surveys, on December 13, of exchanges in Delhi, Mumbai, Pune, Bengaluru, and Hyderabad.

This was supposed to happen sooner or later. I predicted a few weeks ago that “The Man” will eventually regulate or altogether ban cryptocurrency and as of today, it is banned in India. Finance minister Arun Jaitley stated in his budget speech today that the government will do everything in its power to discontinue the use of bitcoin in India. It is not only limited to bitcoin and Jaitley has extended the ban to every virtual currency there is.

Bitcoin Is Officially Illegal In India As The Government Does Not Recognise It As A Legal Tender

He said that India does not recognize the virtual currency as a legal tender and will instead encourage the use of blockchain technology for payment systems.

“The government does not recognize cryptocurrency as legal tender or coin and will take all measures to eliminate the use of these crypto assets in financing illegitimate activities or as part of the payments system,” Jaitley said.

Zebay Said:

Zebay