Bitcoin and other virtual currencies are unlikely to be declared illegal in India but their regulatory fate remains uncertain as authorities try to determine a framwork.
Earlier in March, the country’s Ministry of Finance established an intergovernmental committee to study, research and eventually propose a framework for virtual currencies in India.
Their tasks included:
- Taking stock of the virtual currencies’ legal status globally.
- Studying existing regulatory and legal structures governing virtual currencies around the world.
- Suggesting measures to deal with concerns related to consumer protection and money laundering.
Now, a report by Indian investor publication MoneyControl has cited a government official as stating that bitcoin, despite calls by politicians to outlaw cryptocurrencies, is unlikely to be declared illegal in the country.
The official added:
The panel does not want to openly term it a currency like how Japan has. But it will take more time to come up with rules around it [bitcoin].
Japan officially recognized bitcoin as a legal method of payment akin to gift cards or prepaid cards in April. Such recognition has helped spur bitcoin’s acceptance in the mainstream, with an estimated 300,000 stores that could soon be equipped to accept bitcoin payments amid a wider push by the Japanese government toward cashless digital payments.
While Indian authorities aren’t deeming bitcoin as a currency just yet, the virtual currency panel is reportedly deciding on the government body that will gain regulatory oversight over cryptocurrencies.
“Discussions till now suggest that bitcoin will most likely fall under the ambit of the RBI (India’s central bank),” the source told the publication. The Reserve Bank of India issued a public notice in February this year, warning investors that bitcoin or any companies (exchanges) dealing with bitcoin or digital currencies were operating without a license. In regulatory limbo at the time, bitcoin’s growing popularity and adoption among Indians eventually spurred the Finance Ministry to establish the regulatory panel soon after.
The source further revealed of the discussions within the panel:
Some are of the opinion that bitcoin is a security rather than a currency and should be regulated by Sebi [Securities and Exchange Board of India].
SEBI, India’s capital markets regulator, could work alongside India’s central bank in tracking bitcoin transactions. As CCN reported last week, India’s Supreme Court has demanded that the government and the central bank check for bitcoin transactions in to ‘examine all security related issues’ pertaining to digital currencies.