Till date (from our original article to Part 5), we have seen interesting & exciting use cases being espoused by IDRBT and being developed by multiple Indian banks, starting from smaller banks like Yes Bank to big conglomerate approach by SBI for its ‘Bankchain’ platform). We are now seeing some movement in unchartered territory where we may see some regulatory action coming soon.
Seems Unocoin , India’s own bitcoin company, has tied up with PayU Biz, a Indian based payment platform, has tied up for allowing Unocoin users to buy bitcoin using the netbanking facility. While number of active users or engagers of bitcoin in India is still a matter of speculation, there are key points to consider:
- Directive from RBI (which is abundantly clear) “The RBI advises that it has not given any license/authorization to any entity/company to operate such schemes or deal with Bitcoin or any virtual currency. As such, any user, holder, investor, trader, etc., dealing with virtual currencies will be doing so at their own risk”.
- But there are grey areas which means that this stance of RBI remains a directive as there is no clear violation of existent laws. News report indicates that very soon we can expect some kind of clarity by GOI on legality of ‘crypto currency’. There is an inter-ministerial committee working on the same
- The ‘bitcoin’ proponents has in meantime set up DABFI (Digital Asset and Blockchain Foundation of India), a self regulatory body, for bitcoin industry in India. We tried surfing the website but its focus is “Our objective is to educate people about risk involved with investing and trading crypto tokens” and its regulatory aspects are not yet clear. Moreover the website (accessed on 27th April 2017, 2:43 PM), is hardly functional (on IE) beyond the home page.
- A new marketplace for another ‘cypto currency’, Ethereum has come up (https://ethexindia.com/). In its ‘Terms & Conditions’ it says “Ethers are yet unregulated in India”.
- Left with only directives & no clear rules & regulations, there are multiple ‘money spinning’ schemes have sprang up which will only dent the confidence on ‘bitcoin industry’ but can also force the GOI to come out clearly with either legalizing bitcoin or putting some rules around it. Very recently ‘Onecoin’ team has been raided by police for running a scam.
- Recently police also arrested a few individuals who were dealing in drugs (LSD) and paying their US counterparts through bitcoin.
So to summarize, we believe that it is high time RBI/ GOI has to move from ‘directives’ to very clear unambiguous rules to contain the bitcoin ecosystem. RBI speaks of ‘digitization of cash’ but has been less encouraging on ‘digital currencies’ primarily because of the difficulty in regulating them (lesser control) and also its impact on money laundering. The apprehensions are not unfounded considering what happened with Mt. Gox (bitcoin exchange which went bankrupt after half a billion dollar went missing). RBI has a friend in Ben Bernanke, the former Fed Chairman, who apparently seems to have remarked on perceived anonymity of bitcoin and pointing to its role as “a vehicle for illicit transactions, drug selling or terrorist financing or whatever”.
The thought process of GOI, which has been spearheading the digital India campaign, is not so clear. While similar apprehension is there but pointing out ‘digital currency’ as ‘bad/ illegal’ while espousing ‘digital’ all over India, does not look so ‘politically correct’. But the ‘anonymity’ challenge, unless clearly mitigated, can be very disastrous and will surely attract reservations from not only RBI but other regulators, tax and investigation agencies (e.g. SEBI, Income Tax, ED, CBI).