Bitcoin to be banned in india

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Furthermore, the Indian government wants to introduce a framework for an official digital currency that will be issued by the Reserve Bank of India RBI , which is the central bank of the country.

Back in , the RBI ordered all financial institutions in the country to break off all ties with individuals or businesses dealing in virtual currency such as bitcoin within three months. The diktat was however later overturned by India's Supreme Court, which allowed banks to process cryptocurrency transactions from exchanges and traders.

In , an inter-ministerial committee set up by the government on crypto again proposed to ban them via a draft bill opens in new tab that sought to impose fines and penalties on individuals and exchanges that continued handling crypto. That bill, which was placed in the public domain also called on the Government to think about launching an official digital currency. Governments all over the world have been looking into ways to regulate cryptocurrencies, but no one has yet taken the drastic step of placing a blanket ban on owning them.

Exchanges in the country meanwhile want the Government to engage with them and take their opinion on board before steamrolling ahead with the legislation. Via: TechCrunch opens in new tab. Sign up to theTechRadar Pro newsletter to get all the top news, opinion, features and guidance your business needs to succeed! US Edition. As price is an essential element of a contract of sale, barter is ruled out from a transaction of sale of goods. This means that any transaction whereby payment is made in Bitcoins would come within the category of a barter transaction, for example if flipkart.

In case there is an online Bitcoin exchange where one can buy or sell Bitcoins using real currency such as Mt. Gox based in India which deals only with Indian residents and buys or sells Bitcoins for Indian Rupees, then as per our discussion above all the transactions of this online exchange would be governed by the Sale of Goods Act and all relevant laws regarding sale of goods on an exchange platform with regard to goods such as computer programmes would be applicable to such an online exchange including the Forward Contracts Regulation Act, This would imply that as long as the online exchange does plain vanilla buying and selling of Bitcoins it would not be amenable to regulatory oversight but if it wants to offer Bitcoin derivatives such as Bitcoin futures then it would have to get itself registered as per the provisions of the Forward Contracts Regulation Act and also follow all the rules and regulations prescribed thereunder.

If Bitcoins are transferred from a person residing outside India to a person resident within India then that would amount to import of computer programmes within India. If this transfer is done in return for the Indian party sending an item or rendering a service to the foreign party then this would be a barter transaction.

It is useful to note that although the Indian import and customs regulations do not mention barter transactions, the guidance on the website of the Directorate General of Valuation, Central Board of Excise and Customs, Government of India seems to suggest that barter transactions for import of goods although are not prohibited but do present unique problems of valuation of the goods. However since software imported online does not attract any duty under Indian law, therefore it would be immaterial to discuss exactly how a barter transaction involving Bitcoins should be valued under the Indian customs regime.

For the purposes of this discussion it is sufficient to note that a Bitcoin transaction entered into by an Indian with a party outside India is not prohibited as long as the item or service being exported out of India is itself legal and above board.

For example, a transaction involving an Indian designing a website for a person sitting in Australia and being paid in Bitcoin would be legal whereas sending contraband substances to the same person while getting paid in Bitcoin would not be allowed. This is an interesting question because it would be perfectly legal for a regular citizen to receive Bitcoins from abroad as a gift or donation, etc. Section 2 1 h of the FCRA defines foreign contribution to include the receipt of any article from a foreign source.

If a person imports a computer programme into India he would have to pay the customs duty at the prevalent rates, however if this import of software is done via the internet and does not involve any physical shipments e. This would mean that any person buying a computer programme or software from a vendor abroad would not be liable to pay any customs duty or file any documentation with the customs authorities in India.

This situation would also be applicable to any person buying Bitcoins from an online exchange based outside India. The only documentation that would be required for buying Bitcoins from an online exchange abroad would be that which the bank may insist upon for exchanging Indian rupees into a foreign currency and then transferring it to an overseas account.

This documentation would involve filing of Form A-1 if the total value of the money being exchanged is greater than USD 5, however if the amount of money being exchanged is less than USD 5, then the person is only required to give a simple letter containing basic information viz.

If the transaction is done using a credit card then in most instances, banks would not be insist upon this letter since these transactions usually go through their automated channels. Although Bitcoins can currently be classified only as movable property and more specifically as computer software, this position is not tested in a Court of law.

Even so it is worth noting that even as the legal regime stands now offering of derivative products in Bitcoins might require registration and approval under the Forward Contracts Regulation Act. It is worth noting that unlike other digital currencies such as e-gold, liberty reserve, etc.

Bitcoin is a peer to peer network based currency which does not have one centralized agency or institution regulating the entire system and therefore an argument is made that even if the agencies want to regulate or shut it down they will not physically be able to do so as there is no nodal institution that the authorities can go after. However this argument is fallacious to a certain extent in that the authorities can go after online exchanges which are websites or portals run by individuals or entities which have a physical manifestation.

They would have names, addresses, bank accounts, etc. Looking at the relatively small number of people who use Paypal or other e-wallets in India, it would not be entirely unlikely that the regulations to govern Bitcoin, whenever they come, would be a reaction to a particular event and whether these regulations are enabling or disabling in nature would probably depend upon the nature of the event to which they are reacting.

Note: Although not referred to here because of the limited context of this paper, a similar and much more thorough examination of the legality of Bitcoins done by Nokolei M. You may donate online via Instamojo. Newsletter: Subscribe. Youtube: Centre for Internet and Society. We invite researchers, practitioners, artists, and theoreticians, both organisationally and as individuals, to engage with us on topics related internet and society, and improve our collective understanding of this field.

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The Centre for Internet and Society CIS is a non-profit organisation that undertakes interdisciplinary research on internet and digital technologies from policy and academic perspectives. The areas of focus include digital accessibility for persons with disabilities, access to knowledge, intellectual property rights, openness including open data, free and open source software, open standards, open access, open educational resources, and open video , internet governance, telecommunication reform, digital privacy, and cyber-security.

The research at CIS seeks to understand the reconfiguration of social processes and structures through the internet and digital media technologies, and vice versa. Through its diverse initiatives, CIS explores, intervenes in, and advances contemporary discourse and regulatory practices around internet, technology, and society in India, and elsewhere. Bitcoin: Legal Treatment under the Current Indian Legal and Regulatory Regime This paper is an effort to examine the legal basis and treatment of Bitcoin under the current legal and regulatory regime in India.

What is Bitcoin? Can Bitcoins be Treated as Currency? This can be explained further with the help of two examples: i If a person owns Indian rupee notes worth Rs. Can Bitcoins be considered as Securities? Can Bitcoins be considered as a Derivatives or a Negotiable Instruments? In these guidelines the term Prepaid Payment Instrument is defined in the following words: Pre-paid payment instruments are payment instruments that facilitate purchase of goods and services against the value stored on such instruments.

The value stored on such instruments represents the value paid for by the holders by cash, by debit to a bank account, or by credit cardпїЅ Since Prepaid Payment Instruments have a definite value stored on them which is equal to the amount paid by the holders in cash or by debit or credit card, it seems that Bitcoins cannot be classified as Prepaid Payment Instruments since there is no static value stored in Bitcoins, rather they have an inherent value.

What can Bitcoins be Classified As? Now that we have determined that Bitcoins would in all likelihood be treated as goods or movable property under the current legal regime in India, it would be beneficial to discuss what laws would regulate the various Bitcoin transactions that occur in general practice, for the purposes of this paper we shall limit our discussion to the following transactions: i Mining of Bitcoins; ii Transfer of Bitcoins from one person to another within the territory of India; iii Exchange of Bitcoins for Indian Rupees, provided the entire transaction is based in India; iv Transfer of Bitcoins from one person to another where the person sending the Bitcoins is not resident in India; v Exchange of Bitcoins for Indian Rupees, where the exchange is based outside India.

Transfer of Bitcoins from one person to another within the territory of India Although we have determined above that Bitcoins would in all probability be treated as goods and therefore any sale of Bitcoins would be governed by the Sale of Goods Act, however it must be noted that the Sale of Goods Act does not regulate barter transactions.

Exchange of Bitcoins for Indian Rupees, provided the entire transaction is based in India In case there is an online Bitcoin exchange where one can buy or sell Bitcoins using real currency such as Mt. Transfer of Bitcoins from one person to another where the person sending the Bitcoins is not resident in India If Bitcoins are transferred from a person residing outside India to a person resident within India then that would amount to import of computer programmes within India.

Exchange of Bitcoins for Indian Rupees, where the exchange is based outside India If a person imports a computer programme into India he would have to pay the customs duty at the prevalent rates, however if this import of software is done via the internet and does not involve any physical shipments e.

Conclusion Although Bitcoins can currently be classified only as movable property and more specifically as computer software, this position is not tested in a Court of law.

Meta 24 December,