Introduction to Position of Bitcoin in India
A money system essentially consists of a currency. Each country has its own currency, which acts as a legal tender in the nation and is usually in the form of paper money or coins.
What is Bitcoin?
A digitalized currency and money system. Bitcoin is a cryptocurrency system which works by eliminating intermediaries and thus, decentralising. It works using a cryptocurrency system, thus using codes and carrying out secure financial transactions. Satoshi Nakamoto first created bitcoin on 3rd January, 2009 and it was created to eliminate any intermediary in between, thus using a “peer to peer” network. A blockchain, which is a publicly distributed ledger stores all bitcoin transactions.
Bitcoin Mining
A mathematical process which is complex in nature and through the use of which new bitcoins are bought into the world by bitcoin miners. Verifying and adding bitcoin transactions to blockchain also go on to be a part of the process. Recent Bitcoin transactions are also assembled in the bitcoin mining process. Solving of tough puzzles computationally is also included.
Position of Bitcoin Mining in India
Is it legal?
The Government of India and the RBI so not recognize Bitcoin as a legal tender, thus Bitcoin is not eligible to be used for any financial transaction in India. All banks and such entities are prohibited from dealing in or settling digital or virtual currencies by the RBI. But, one could say that it is not legal and not illegal as no legislation of the country recognizes bitcoin and there is no statutory definition of bitcoin. Neither is there a law which imposes penalties or prosecution for bitcoin mining or for dealings in bitcoin.
Any bitcoin-related work is done is an individual’s risk due to lack of its legal recognition. But, in India, individuals cannot carry on bitcoin-related transactions with banks.
Various laws relating to currency include:
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Foreign Exchange Management Act (FEMA)
The Foreign Exchange Management Act regulates all international transactions. Currency under it includes postal notes, money orders, bill of exchange, postal orders, currency notes, cheques, traveller’s cheque, credit cards and such other instruments as notified by the Reserve Bank of India. The prohibition of virtual currencies by the RBI has resulted in the exclusion of bitcoin under the provisions of FEMA.
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Coinage Act, 2011
Coins are defined under Section 2(a) of the act. Bitcoins do not come under the said definition and thus are not covered by the same.
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Payment and Settlement Systems Act, 2007
The act regulates payments in India and helps parties to make successful payments. A payment system includes helps a beneficiary to receive payment from a payer and services such as settlement, payment or clearing are including within it. Stock exchange is excluded. Credit, debit and smart card operations are also included. Payment systems are governed by the RBI, thus excluding bitcoin.
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Securities Contracts (Regulation) Act, 1956
Section 2(h) of the act defines securities and an important condition for an instrument to be a security is its issuance by a body corporate and the assets of the body corporate should back the same. Thus, bitcoin is not a security as well and is not covered under the act.
The fact that cryptocurrencies are not legal tender in India was stated by Mr. Arun Jaitley in his budget speech. Governments take all measures t stop the use of cryptocurrency and that assets are not formed by it. Bitcoins have no physical identity or attributes of a coin they have no physical attributes of a coin. Even though cryptocurrencies have faced criticism from the government, they have also received appreciation basis their innovation and modern technology.
By Maahi Mayuri
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