The financial institution ‘Reserve bank’ reserved its views on the lawfulness of digital currencies in India, telling the apex court that the constitution has not outlined any system for the virtual currencies. Citing the provisions of The Coinage Act and therefore the RBI’s Act, the documents explained that the present legal frameworks neither acknowledge bitcoin as currency nor asset. Hence, they’re not a valid payment system.
The Supreme Court of India recently heard a case between the RBI and the bitcoin exchanges. The court’s busy schedule has pushed the hearing date twice already, for now the next hearing is currently scheduled for 17th Sept. this year.
RBI has been facing a backlash from the Indian crypto-community ever since it ordered banks to discontinue their services with crypto exchanges. An RTI response after the blanket ban further led that the Indian apex bank didn’t analysed crypto currrencies enough before dismissing it.
However, RBI aforesaid that they may not be the one to term Bitcoin as legal or illegal. They’re tied by statutory provisions – the acts mentioned within the Constitution of India – that makes them to take the mandatory measures against the booming digital currency business.
Adding further, the Central Bank said:
“RBI cannot unilaterally decide for the govt., on the lawfulness of Bitcoins.”
The RBI documents further mentioned that the Foreign Management Act ‘FEMA’ that permits the authority to call instruments as a valid currency. However the act itself is just valid for instruments with similar characteristics that of cheques, cash orders, postal orders, etc.
The documents further added that:
“Thus, as per the laws it’s would be not possible to mention bitcoins as currency by FEMA…Since Bitcoins and several VCs aren’t within the physical type and neither expressed or drawn in Indian rupees, the definition of ‘Indian currency’ can’t be made applicable to bitcoins.”
RBI additionally noted that Bitcoin couldn’t represent the class of foreign cash, as well, since they’re not issued by any sovereign state. Also, the absence of any legal definition of virtual currencies puts it far from the scope of The Payment and Settlement System Act (PSSA).
As per this definition the scope of making a regulatory framework will fall either upon by the RBI, or the Securities & Exchange Board of India ‘SEBI’. However, a team has already been organized for the crypto study tours to the Switzerland, the UK and Japan, hinting that the security regulator might take on the burden of creating some new Bitcoin related laws in the country.