New Delhi: The Reserve Bank of India (RBI) has told the Supreme Court that cypto-currency, such as Bitcoins, cannot be considered as valid ‘currency’ or ‘money’ under the existing legal regime.
In its counter affidavit filed in response to a clutch of petitions led by Sidharth Dalmia and Dwaipayan Bhowmik, India’s monetary regulator further said that virtual currency cannot even be validated as a ‘payment system’ since it is peer-to-peer and does not involve a service provider.
“It is submitted that crypto-currencies fall short of being true currencies. It is further submitted that RBI does not consider virtual currencies such as Bitcoins as ‘currency’ under the extant laws. There are no enabling provisions under the extant law to treat Bitcoin as currency,” stated the affidavit, filed through the Assistant General Manager of the RBI.
The regulator cited provisions of The Coinage Act and The RBI Act to emphasise that as Bitcoins and other Virtual Currencies (VCs) are not in the physical form and that they are not issued by the Bank, the pertinent legal provisions are not attracted to the crypto-currencies.
The affidavit added that the RBI has the authority under The Foreign Exchange Management Act (FEMA) to notify instruments as valid currency but the requirement under the law is that such an instrument should possess identical or similar characteristics that of cheques, postal orders, money orders etc.
“Thus, legally it may not be possible to notify Bitcoins as currency for the purpose of FEMA...Since Bitcoins and other VCs are not in the physical form and neither expressed or drawn in Indian rupees, the definition of ‘Indian currency’ cannot be made applicable to Bitcoins,” said the affidavit.
Similarly, the RBI said, since Bitcoins and VCs are not issued by any sovereign state, they cannot be considered as foreign currency too.
On the applicability of The Payment and Settlement System Act, the affidavit pointed out that VCs are defined neither as money nor as currency and hence, this law would not cover the transactions involving crypto-currencies.
“Therefore, the question of RBI declaring them as legal or illegal does not arise,” stated the affidavit, further maintaining that the RBI has adequately cautioned users, holders and traders of VCs about the potential risks that they are exposing themselves to vide press releases between 2013 and 2017.
It added that the issue of legalising VCs will have implications on the role and responsibilities of other regulatory and enforcement agencies as well and therefore the “RBI cannot unilaterally decide for the Government, on the legality of Bitcoins”.
In March 2017, the affidavit said, an Inter-Disciplinary Committee was constituted by the Union Finance Ministry on this issue and the RBI is now waiting for the Government to accept its recommendations and delineate the roles and responsibilities. Besides, another Committee has been set up by the Department of Economic Affairs to propose specific actions relating to VCs.
The RBI has also requested the Supreme Court to dismiss all the petitions, arguing these are matters of economic policies and decisions taken by the Government and the RBI within their statutory powers. The petitioners’ own views on the matter of policy, it said, cannot be the basis of a challenge.
The matter was listed on Tuesday before a bench headed by Justice Rohinton F Nariman but it could not be taken up due to paucity of time. It is now expected to be heard on September 17.