India’s RBI still opposes legalisation of cryptocurrencies
The Reserve Bank of India (RBI) showed little sign of softening its opposition to cryptocurrencies, as it filed an affidavit in the country’s Supreme Court that clarified its stance.
The court is currently hearing a case between the RBI and bitcoin exchanges, but its busy schedule has pushed back the hearing date twice already; with the next hearing now scheduled for Monday September 17.
Citing the provisions of The Coinage Act and The RBI Act, the affidavit noted that the existing legal frameworks do not recognise bitcoin (BTC) as legal currency, which will continue to be the case unless or until the government adjusts the requirements for what a legal currency can be.
The RBI noted that, in addition to not meeting the legal framework for a currency, cryptocurrencies are “neither currency nor money; they can’t even be considered as a valid payment system.”
Contesting the ban
In recent months, India’s crypto exchanges have disputed a ban on the trading of cryptocurrencies imposed back in April, when the RBI isolated them by forbidding banks from working with them. Previous to this action, India’s government regularly warned about dealing in BTC and crypto, insisting they are not legal currencies and that investors should trade with caution.
The RBI affidavit cites The Foreign Exchange Management Act (FEMA), giving it the authority to name instruments as valid currency. But the act itself is only valid for instruments with similar characteristics to those of cheques, money orders and postal orders.
“Thus, legally it may not be possible to notify Bitcoins as currency for 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,” the affidavit adds.
RBI also contends that BTC also does not fall under the category of foreign money, as it is not issued by any sovereign state. Also, the absence of any legal definition of virtual currencies removes it from the purview of The Payment and Settlement System Act (PSSA).
The central bank has previously supported the regulation of cryptocurrencies in India, with the proviso that a concrete definition is needed to begin the regulatory process. However BTC’s multifaceted characteristics – it can be used as money, a commodity and even stock – make a definition difficult.
Once it has been established however, the task of developing a regulatory framework will fall either upon the RBI, or the Securities & Exchange Board of India (SEBI). The latter has already organised cryptocurrency study tours to the Switzerland, the UK and Japan for its officials, suggesting that SEBI might undertake the creation of a new BTC law.