Crypto 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.