Thefinancial institution ‘Reserve bank’reserved its views on thelawfulnessof digital currencies inIndia, telling the apex court that the constitution has notoutlinedanysystemfor the virtual currencies. Citing the provisions of The Coinage Actand therefore theRBI’sAct, the documents explained thatthe presentlegal frameworks neitheracknowledge bitcoin as currency norasset. Hence,they’renot a valid payment system.
The Supreme Court ofIndiarecentlyheard a case between theRBIand the bitcoin exchanges. The court’s busy schedule has pushed the hearing datetwicealready, for now the next hearing iscurrentlyscheduledfor17th 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 banfurtherledthat the Indian apex bank didn’tanalysedcrypto currrencies enough before dismissing it.
However,RBIaforesaidthat they maynot be the one to term Bitcoin as legal or illegal.They’retiedby statutory provisions – the acts mentionedwithin theConstitution ofIndia–that makesthem to takethe mandatorymeasures against the booming digital currencybusiness.
Adding further, the Central Bank said:
“RBI cannot unilaterally decide forthe govt., on thelawfulnessof Bitcoins.”
TheRBIdocumentsfurther mentioned that theForeignManagement Act ‘FEMA’thatpermits the authorityto callinstruments as a valid currency.Howeverthe act itselfis justvalid for instruments with similar characteristics that of cheques,cashorders,postalorders, etc.
The documents further added that:
“Thus,as per the lawsit’s would be not possibletomentionbitcoins as currency by FEMA…Since Bitcoins andseveralVCsaren’twithin thephysicaltypeand neither expressed or drawn in Indian rupees, the definition of ‘Indian currency’can’t bemadeapplicable to bitcoins.”
RBIadditionallynoted that Bitcoincouldn’trepresenttheclassof foreigncash, as well, sincethey’renot issued by any sovereign state. Also, the absence of any legal definition of virtual currencies puts itfar fromthescope 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.