Crypto currency is also known as Bitcoin with virtual presence and unknown
NGOCrypto currency is also known as Bitcoin with virtual presence and unknown
ownership maintained in a peer-to-peer network by entries in an enormous database
called “block chain,” and transactions takes place by participants keys known as
crypto-credentials as a signature and validated by network i.e. signatures the
transaction of sender and receiver being updated and reflected by block chain. This
transaction is validated decentralized way by miners who maintain block chain. Some
economist has termed Bitcoin as “fiduciary currency,” because of no inherent value,
and derive value in exchanges either from regular currency backed by government or
accepted online by other.
As virtual-currency market and transactions are sky rocking and these digital monies
are non-legal tenders with different standards in most of the jurisdictions. Global
regulators are divided on how to responses on it. As of now there is no international
regulator to regulate virtual-currency.
India Illegal. The Indian government is planning to bring regulation.RBI banned the sale or purchase of crypto currency. Not legal tender.
- Overview and Application if any of Indian Acts on Cryptocurrency and Industry
After going through aforementioned policy stand, let us see what are the laws may be
applicable to cryptocurrency technology and its various products in India and
understand whether Bitcoin falls under the review of Central Government.
4.1. Constitution of India Act, RBI Act and FEMA
Article 246 of Constitution along with Entry 36 and 46 of List I of the VII Schedule list
out the subject matter to legislate currency, coinage, legal tender, foreign exchange and
bills of exchange, cheques, promissory notes and other like instruments respectively by
Center and State governments in India. Test is whether Bitcoin fulfill any condition of
aforementioned instruments so Central government can legislate. Coming to the term
of currency we need to understand the Reserve Bank of India (RBI) Act. Interestingly
definition of currency is not defined by RBI Act rather it is defined by Foreign
Exchange Management Act, 1999 (FEMA) stating in Section 2 (M) that “all currency
notes, postal notes, postal orders, money orders, cheques, drafts, travelers’ cheques,
letters of credit, bills of exchange and promissory notes, credit cards or such other
similar instruments, as may be notified by the Reserve Bank”. Under the Currency
Ordinance 1940, One rupee and Notes issued by RBI is defined as a legal tender and as
far as Bitcoin is concerned since it is not legal tender thus falls out of this category. This
analysis is also supported by Section 22 which enumerates the right of issuance of bank
notes solely rest with RBI and bank notes are legal tender in India as per Section 26 of
RBI Act. As per this analysis Bitcoin are not currency but having several features of a
currency or legal tender thus qualify as “such other similar instruments” defined by
Section 2(h) of RBI Act and to be notified by RBI. Thus, it is policy question before the
RBI whether to recognize medium of certain electronic records claiming to be
“Decentralized Digital Currency” or “Virtual Currency”, such as, Bitcoin, litecoins,
bbqcoins, and dogecoins etc. as such other similar instruments.
4.2. Payment System Rules and Operating Standards in India